11 October 015, Lagos – Foreign exchange inflows into Nigeria fell by N678bn ($3.39bn) between January and June this year, findings from various quarterly reports of the Central Bank of Nigeria have shown.
Although the fall in forex during the period was largely attributed to the significant drop in crude oil receipts, analysts stated that the economic landscape in Nigeria, particularly in the past three months, had not helped matters.
An analysis of forex inflows for the fourth quarter of 2014, and the first and second quarters of 2015 showed that foreign exchange movement through the CBN kept falling in each of the quarters.
Provisional data from the CBN indicated that foreign exchange inflows in the fourth quarter of 2014 amounted to $10.36bn.
But the latest report of the CBN for the second quarter of 2015 showed that forex inflows stood at $6,97bn, indicating a decline of $3.39bn or N678bn when calculated on N200 to a dollar.
The regulatory bank, in its second quarter 2015 report, said, “Provisional data indicated that foreign exchange inflows through the CBN in the second quarter of 2015 amounted to $6.97bn, representing a decline of 16.1 and 45 per cent below the levels in the preceding quarter and the corresponding period of 2014, respectively.
“The development was due to the significant fall in crude oil receipts, which more than offset the marginal increase in inflow from its non-oil component. Foreign exchange outflow through the CBN amounted to $8.2bn, showing a decline of 36.4 and 36 per cent below the levels in the preceding quarter and the corresponding period of 2014, respectively.”
Further findings showed that the fall in forex inflows was largely pronounced between the fourth quarter of 2014 and the first quarter of 2015, as the difference between both quarters was put at $2.85bn or N570bn.
However, the difference in the forex inflows between the first and second quarters of this year was $540m or N1.08bn.
The CBN, in its report for the first quarter of 2015, stated that “Provisional data indicated that foreign exchange inflows through the CBN in the first quarter of 2015 amounted to $7.51bn, representing a decline of 29.4 and 26.5 per cent below the levels in the preceding quarter and the corresponding period of 2014, respectively.
“The development was due to the fall in both its oil and non-oil components. Foreign exchange outflow amounted to $12.35bn, showing a decline of 15 and 21.3 per cent below the levels in the preceding quarter and the corresponding period of 2014, respectively.”
Explaining the implications of the persistent fall on the economy, a former President of the Association of National Accountants of Nigeria, Dr. Samuel Nzekwe, told our correspondent that the development would adversely affect foreign investments in Nigeria.
He said, “It is going to have an unimpressive impact on foreign direct investment in Nigeria. If your forex inflow is falling, foreign investors will be sceptical about bringing in their funds and you should also note that many of them bring in forex.
“I will also want you to know that foreign investors have been weighing the Nigerian economy in the past couple of months. It might interest you to know that they are not comfortable about the Nigerian situation, particularly the economy. Many of them are beginning to withdraw.
“What we have now are portfolio investors who invest in shares, bonds and the likes. Those who are to invest in the real sector are not coming. The forex inflows are declining and the investment climate is not clear. So, the fall may continue if the right steps are not taken as soon as possible.”
On ways to handle the situation, Nzekwe urged the government to come up with a clear economic policy, adding that it had been predicted that the oil situation might not improve any time soon.
He said the country should desist from its reliance on oil revenue, stressing that only a clear-cut economic policy would pacify investors who were always willing to invest in Nigeria because of its abundant business potential.
Nzekwe said, “Many investors don’t know the economic policy direction of this government. Foreign investors come in with foreign exchange, and when they do so, the country will have a lot of these foreign currencies for business development.
“Even the many portfolio investors in Nigeria today don’t know the policy direction of the government yet. So, the best way out is to make investors know what to expect through clearly defined economic policy. Maybe when the ministers take positions, we will have a clearly defined economic policy.”
Analysts at the FBN Capital Research, an arm of First Bank of Nigeria Plc, urged the government to treat economic diversification with utmost importance, as this would boost the country’s revenue and ensure forex inflows.
“The new administration is to treat economic diversification as a priority. The non-oil sector accounts for 90 per cent of Gross Domestic Product but only five per cent of merchandise export revenues. Policies geared towards harnessing this sector will assist in boosting non-oil export earnings,” they added.