Nigeria’s FX Inflows Hit $2.55 Billion in Two Months After Naira Unification, CBN Reports

The Central Bank of Nigeria (CBN) has revealed that the foreign exchange (FX) inflows into the country increased to $2.55 billion in May and June, following the unification of the naira exchange rate.

The CBN said that the inflows were mainly driven by companies and exporters, as foreign investors remained cautious amid the economic uncertainty.

According to the CBN’s July Updates, the total inflows into the Investors and Exporters (I&E) window rose for the second consecutive month in June to $1.41 billion from $1.14 billion in May. The I&E window is the official market where the naira is traded freely against the dollar.

The CBN noted that the local inflow accounted for over 90% of the total inflow in June, reaching $1.11 billion. The local inflow was boosted by higher inflows from non-bank corporates ($597.10 million) and exporters ($448 million).

The CBN had unified the naira exchange rate on July 14, hoping to improve liquidity and stability in the FX market and attract more foreign investment. However, the move did not achieve the expected results, as the naira remained weak and volatile against the dollar.

The International Monetary Fund (IMF) blamed Nigeria’s loose fiscal and monetary policies for creating excess liquidity in the economy, which put pressure on the exchange rate and inflation. The IMF advised Nigeria to tighten its policies to stabilize the naira and curb inflation.

The naira unification has also had some negative impacts on various sectors of the economy. For instance, many companies reported pre-tax losses in their Q2 financial statements due to foreign exchange revaluation losses, despite having improved revenues. Moreover, the price of fuel increased to N640/ltr as Nigeria coped with the fuel subsidy removal.

Despite these challenges, some experts believe that the naira unification would lead to improvements in FX liquidity over the medium term and long term. They also expect that there would be an inflow of investors in various sectors of the economy due to the naira float.

Meanwhile, the naira plunged to another record low of N945/$1 at the parallel market on Thursday, August 10, 2023, as the demand for dollars by importers and other end-users far outstripped supply. Operators who spoke to Newsflash Nigeria quoted rates as high as N945/$1 as against the N925/$1 that was quoted on Wednesday as they continued to lament the scarcity of dollars amid higher demand.

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