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The Central Bank of Nigeria (CBN) has reported a significant reduction in foreign exchange (FX) utilization during the third quarter of 2024, primarily driven by a decline in invisible transactions. This was detailed in the latest Quarterly Statistical Bulletin published on the CBN’s website.
Invisible transactions, which include non-physical expenditures such as school fees, student maintenance allowances, medical bills, and other eligible payments, experienced a notable 32% quarter-on-quarter (QoQ) decline, falling to $2.2 billion. This drop reduced their share of total FX usage to 39%, down from 51% in Q2 2024.
Overall, FX utilization across various economic sectors fell by 11% QoQ to $5.7 billion in Q3 2024. However, when compared year-on-year (YoY), total FX usage surged by an impressive 72%, indicating strong sectoral growth despite the quarterly dip.
Financial services, which traditionally dominate the invisible transaction segment, were the primary contributors to the QoQ decline. According to experts at FBNQuest, FX utilized by the financial sector fell by 34% QoQ to nearly $2 billion.
In contrast, forex consumption for merchandise imports saw an increase, rising by 10% QoQ to almost $3.5 billion. This boosted its contribution to total FX usage to 61%, up from 49% in the previous quarter.
The industrial sector remained the largest consumer of forex within the merchandise goods category, with 53% of the FX allocated to the importation of raw materials, machinery, and equipment. Food products followed as the second-largest category, recording a 16% QoQ increase to $633.6 million.
FBNQuest noted that the trend in sectoral FX utilization has been on a downward trajectory since Q1 2023. This decline has largely been attributed to reduced demand for FX, driven by the substantial devaluation of the naira.
Looking ahead, FBNQuest expressed optimism about a gradual improvement in FX utilization across various sectors, citing increased FX liquidity and better access to foreign currency due to the CBN’s ongoing reforms aimed at enhancing transparency and efficiency in the FX market.
Since the naira’s devaluation, the CBN has implemented several measures to boost FX liquidity, including streamlining FX trading and introducing policies to facilitate access to foreign currency. These reforms are expected to contribute to a more stable and transparent FX market in the coming months.
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