Naira Skids as FX Inflows from Exports Decline
The value of the Nigerian naira declines 0.11% on Tuesday as the Investors and Exporters foreign exchange market after the nation reported that exports receipt fell by about 20% in the third quarter of the year.
The exchange rate at the Investors FX window hits N445.80 from N445.33 recorded yesterday as the market was heated up with foreign currencies demand for imports.
This is coming as foreign currency inflows into the economy weakened in the third quarter, according to National Bureau of Statistics data which indicates that exports revenue dropped.
The trade balance was unfavourable for the growth-starved Nigerian economy with a strong dependence on imports for its citizens’ survival.
Analysts said the Central Bank of Nigeria (CBN) requires a strong gross external reserves buffer to keep the naira strong via market intervention.
Unfortunately, policymakers have tried unsuccessfully to drive foreign currency into the local economy.
Foreign investors maintain distance from Nigeria partly due to the CBN capital control measures and its multi-tiered exchange rate system, noted to be creating confusion about the true value of the naira.
In the trade report, Nigeria’s statistics office said total exports declined by 19.89% when compared to the second quarter of 2022.
However, it increased by 15.52% when compared with the third quarter of 2021 when it settled at ₦5.136 trillion.
While dollar inflows from exports declined, Nigeria’s imports bills rose in the same period, a development that partly explains persistent pressures facing the local currency. READ: Oil Skids as Saudi Moves to Boost Output
Meanwhile, total imports hit ₦5,664.30 billion in the third quarter of 2022, representing a 4.22% increase when compared with the value recorded in Q2, 2022 when it settled at ₦5,435.01 billion.
This translates to a 6.16% increase when compared to the value recorded in the corresponding quarter of 2021 when Nigeria reported ₦5,335.86 billion, according to the trade data.
The negative trade position appears to have impacted the nation’s external reserve which printed at $37 billion, covering about 10 months’ imports level while the global price of oil remains in tight.
In the parallel market, the exchange rate traded on a calm note ahead of the release of Nigerian new naira notes. FX spot rate across the Bureau de Change operators market was unchanged at N735, according to channel checks.
On Tuesday, Brent crude price nosedived 0.50% to $82.26 a barrel while the west Texas instrument grade fell to $76.58 per barrel.
According to data from FMDQ, Nigeria Autonomous Foreign Exchange Fixing (NAFEX) turnover increased by 33.7% to $159.0 million on Friday close amidst an expectation that the local currency will face a forced devaluation in the first quarter of 2023. # Naira Skids as FX Inflows from Exports Drop
