Nigeria (Commonwealth) _Nigeria received $1.71 billion in external loans to enhance foreign currency inflows in the first nine months of 2023.
According to National Bureau of Statistics, total capital inflow, including Foreign Direct Investment, Foreign Portfolio Investment, and others, totaled $2.82 billion for the period under consideration. So far, foreign loans have accounted for 60.80% of FX inflows into the nation.
FX inflows into the nation declined in 2023, with total capital imports falling by 33.99 percent in the period under review, compared to the $4.27 billion recorded in the same time in 2022. Only 38.56 percent of FX inflows ($1.65 billion) into the nation were loans in the first three quarters of 2022.
According to the data, FDI and FPI inflows into the nation have decreased; FDI and FPI have decreased from $383.85m and $2.16bn to $193.4m and $843.24m, respectively. The frequent volatility of the naira in the foreign currency market had been blamed on a lack of dollar supply.
The NBS stated on capital inflows into the country, “In Q3, 2023, total capital importation into Nigeria stood at $654.65m, lower than $1.16bn recorded in Q3, 2022, indicating a 43.55 percent decline.” Capital imports declined 36.45 percent from $1.03 billion in Q2, 2023 to $1.03 billion in Q3, 2023.
Other Investment accounted for 77.56 percent ($507.77 million) of total capital inflow in Q3, 2023, subsequent to Portfolio Investment at 13.31 percent ($87.11 million) and Foreign Direct Investment at 9.13 percent ($59.77 million).
When Nigeria floated its currency in June 2023, the idea was that it would increase foreign exchange inflows into the economy. According to the World Bank, the naira has lost around 40% of its value since then.
The International Monetary Fund recently revealed that the national currency was under strain. It stated that the country was free to apply for a loan from it in order to stabilize its currency. According to the fund, Nigeria is experiencing high inflation of 26% year on year in August, putting pressure on the naira.
The government harmonized the several official exchange rate windows in June. This is a positive step that will assist to improve the operation of the foreign currency market. We also applaud the Central Bank of Nigeria’s recent move to relax the prohibition on 43 products previously barred from receiving foreign exchange through the official window. This is a move in the right path toward a market-determined exchange rate system.
Wale Edun, the Minister of Finance and Coordinating Minister of the Economy, has stated that the government is anticipating $10 billion in inflows in the near future to assist it clear its foreign exchange backlog and stabilize the naira. He saw that the market was illiquid and not working correctly due to a lack of supply.
Furthermore, there is a line of sight for $10 billion in foreign exchange in the relatively near future in weeks rather than months, Edun said, citing the supply of foreign exchange through NNPC, increased production, reduced expenditure, transactions such as forward sales, and discussions with sovereign wealth funds that are ready to invest and provide advance alongside that investment.
To address the country’s persistent dollar shortage, the Nigerian National Petroleum Company Limited announced that it has acquired a $3 billion emergency crude oil repayment credit from the African Export-Import Bank.
Foreign Direct Investment into Nigeria has decreased by $470.8 million in the previous five years, according to media reports. This followed analysis of several National Bureau of Statistics Capital Importation reports.
According to Investopedia, FDI is an investment in a foreign firm or project made by a foreign investor, corporation, or government. The NBS reported on Friday in its third quarter 2023 Capital Importation report that overall foreign investments entering the nation fell to $654.6 million from $1.1 billion in Q2.
