CBN Report Highlights Key Economic Trends

The Central Bank of Nigeria (CBN) has revealed a 2.97 per cent decline in net foreign exchange inflow to the Nigerian economy during the third quarter of 2024. According to the bank’s latest economic report, net forex inflows stood at $14.46 billion, compared to $14.89 billion in the previous quarter. Despite this drop, year-on-year figures reflect a 75.91 per cent surge from $8.22 billion recorded in Q3 2023.

Breakdown of Forex Inflows and Outflows

Foreign exchange inflows rose by 3.01 per cent in Q3 2024, reaching $22.89 billion, up from $22.22 billion in Q2. The increase was attributed to a 39.63 per cent growth in inflows through official sources, which amounted to $11.86 billion, compared to $8.49 billion in the preceding quarter. Conversely, inflows from autonomous sources declined by 19.66 per cent to $11.03 billion from $13.72 billion.

On the outflow side, foreign exchange outflows rose by 15.18 per cent to $8.43 billion. Outflows through official channels surged by 27.91 per cent to $7.31 billion, while those from autonomous sources decreased by 30.06 per cent to $1.12 billion.

“Consequently, net foreign exchange inflow through the economy decreased by 2.97 per cent to $14.46 billion, from $14.89 billion in the preceding quarter,” the report stated. It added that net inflows through autonomous sources fell to $9.90 billion from $12.12 billion, while the CBN recorded a net inflow of $4.55 billion, compared to a net outflow of $2.78 billion in Q2.

Diaspora Remittances Surge

CBN Governor Olayemi Cardoso disclosed that diaspora remittances processed through International Money Transfer Operators reached $4.22 billion between January and October 2024. This represents a nearly twofold increase from the $2.62 billion recorded during the same period in 2023.

Monthly remittances also grew, rising from $336 million in September 2024 to $402 million in October 2024. Cardoso attributed this growth to improved remittance systems, policies implemented by President Bola Tinubu, and increasing trust among Nigerians in the diaspora to contribute to national development.

Exchange Rates and External Reserves

During the third quarter, the average exchange rate at the Nigerian Autonomous Foreign Exchange Market depreciated by 14.62 per cent to N1,588.64/$, from N1,385.96/$ in Q2 2024. This depreciation was driven by heightened demand pressure.

Meanwhile, Nigeria’s external reserves rose to $39.29 billion by the end of September 2024, compared to $34.76 billion at the end of the previous quarter. This reserve level is sufficient to cover 8.91 months of imports for goods and services or 13.34 months for goods alone.

Inflation and Economic Outlook

As of November 2024, Nigeria’s inflation rate reached 34.60 per cent, reflecting a 0.72 per cent increase from October’s 33.88 per cent. The rise was primarily driven by food and energy costs. The CBN projects that inflation will remain elevated in the final quarter of 2024 due to ongoing policy reforms, which have increased energy and transport costs.

Despite these challenges, the CBN’s report highlighted a positive fiscal outlook. “Fiscal reforms are expected to yield favourable outcomes, such as contracting fiscal deficits and higher revenue collection,” the report noted. However, risks such as volatile global crude oil prices and low production levels relative to OPEC quotas remain.

The external sector is forecasted to remain robust, supported by higher domestic crude oil production, trade surpluses, and the full operations of the Dangote and Port Harcourt refineries. Global economic conditions, including easing inflation in advanced economies, are expected to further stimulate trade and investment.

Conclusion

While the Q3 decline in forex inflows raises concerns, the surge in diaspora remittances, improved external reserves, and ongoing fiscal reforms underscore the resilience and potential of Nigeria’s economy. As the country navigates challenges such as inflation and exchange rate pressures, sustained efforts in policy implementation and economic diversification remain critical.