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 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.
FDI and FPI inflows into the country fell according to the data; FDI and FPI fell from $383.85m and $2.16bn to $193.4m and $843.24m respectively. The lack of dollar supply had been blamed for the constant fluctuation of the naira in the foreign exchange market.
Commenting on the capital importation inflow into the country, the NBS said, “In Q3, 2023, total capital importation into Nigeria stood at $654.65m, lower than $1.16bn recorded in Q3, 2022, indicating a decline of 43.55 per cent. In comparison to the preceding quarter, capital importation fell by 36.45 per cent from $1.03bn in Q2, 2023.
“Other Investment ranked top accounting for 77.56 per cent ($507.77m) of total capital importation in Q3, 2023, followed by Portfolio Investment with 13.31 per cent ($87.11m) and Foreign Direct Investment with 9.13 per cent ($59.77m).”
When Nigeria floated its currency in June 2023, the expectation at the time was that it would improve FX inflows into the economy. Since then, the naira has lost about 40 per cent of its value according to the World Bank.
Recently, the International Monetary Fund disclosed that the national currency was under pressure. It noted that the country was free to seek a loan from it to stabilise its currency.
“In June, the authorities unified the different official exchange rate windows. This was a welcome step as it will help to strengthen the functioning of the foreign exchange market. We also welcome the CBN’s recent decision to lift the ban on the 43 items previously restricted from accessing foreign exchange from the official window. This is a positive step in the direction of a shift to a market-determined exchange rate regime.”
Recently, the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, noted that the country was expecting about $10bn inflows in the nearest term to help it clear foreign exchange backlog and stabilise the naira.
He noted that the market was illiquid and not functioning properly because there is no supply.
“In addition, from the supply of foreign exchange through NNPC, increased production, reduced expenditure, from transactions such as forward sales, from our discussions with sovereign wealth funds, that are ready to invest and provide advanced alongside that investment, there is a line of sight of $10bn worth of foreign exchange in the relatively near future in weeks rather months,” Edun said.
To tackle the lingering dollar scarcity in the country, the Nigerian National Petroleum Company Limited, announced that it had secured a $3bn emergency crude oil repayment loan from the African Export-Import Bank.
