Foreign exchange (FX) utilisation across Nigeria’s economy dropped by 11% to $5.7 billion in the third quarter of 2024, with the decrease largely attributed to a sharp reduction in invisible transactions.
According to the Central Bank of Nigeria’s (CBN) Quarterly Statistical Bulletin, compiled by FBNQuest, FX consumption for non-physical transactions—such as travel, insurance, and remittances—fell by 32% to $2.2 billion during the period. Invisible transactions, which once accounted for 51% of total FX utilisation, now represent 39%.
The financial services sector played a major role in the decline, recording a 34% quarter-on-quarter (q/q) drop in FX demand, amounting to nearly $2 billion.
This trend highlights reduced activity in sectors reliant on foreign exchange for services, further reflecting the economic pressures linked to the Naira’s devaluation and ongoing market adjustments.
In contrast, FX demand for merchandise imports—covering physical goods such as raw materials and machinery—grew modestly by 10% q/q to reach $3.5 billion. This brought merchandise imports’ share of total FX utilisation to 61%, up from 49% in the previous quarter.
The industrial sector remained the largest consumer of foreign exchange in this category, accounting for 53% of FX allocated for imported raw materials, machinery, and equipment. Additionally, forex demand for food products—the second-largest category—rose by 16% q/q to $633.6 million.
The decline in FX utilisation has been a persistent trend since early 2023, primarily due to weakened demand following the Naira’s devaluation. However, analysts expect a moderate rebound in dollar demand as the CBN implements measures to improve foreign currency liquidity.
The CBN’s initiatives, including streamlining FX trading and enhancing market transparency, aim to ease pressure on the FX market and ensure stable access to foreign currency across key economic sectors.
As the Nigerian economy adapts to these changes, it is anticipated that FX utilisation will stabilise, offering a more predictable environment for businesses and investors alike.
This decline in FX demand underscores the importance of policy measures to balance liquidity with economic growth, paving the way for a more resilient and transparent financial system.
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