Net foreign exchange (FX) flow through the Nigerian economy increased to US$3.08 billion in July 2021 from US$2.38 billion in June 2021, according to the Central Bank of Nigeria (CBN).
This followed some of the foreign exchange measures taken by the CBN to increase supply and quell demand pressure.
In July 2021, the CBN discontinued foreign currency sales to Bureau De Change operators but increased its sales of Invisibles to commercial banks to meet legitimate foreign exchange demand and sustain the stability in the foreign exchange market.
Hassan Mahmoud, director, monetary policy department, CBN who spoke at the ongoing workshop for Finance Correspondents Association of Nigeria (FICAN) and business editors in Gombe State, noted that the balance of trade moderated by 52.56 percent to a deficit of N1,870.77 billion in Q2 2021 from a deficit of N3,943.45 billion in Q1 2021, resulting from a 74.72 percent increase in export relative to a 1.45 percent increase in import.
Consequently, Nigeria’s current account deficit improved to US$1.75 billion in Q1 2021(1.76 % of GDP) relative to US$5.26 billion (4.53% of GDP) in Q4 2020, due to a lower deficit in the goods account, arising from a decline in non-oil import and higher export receipts.
Represented by Yusuf Dauda Bulus, deputy director, monetary policy department, he said the gross external reserves increased by 7.41 percent at the end-August 2021 relative to its value at end-July 2021 due to a 159.81 percent or US$3.33 billion increase in the receipt of Special Drawing Rights (SDR). A correlation analysis showed a negative paradoxical relationship between the gross external reserves and the exchange rates, as well as, a negative relationship between oil price and the gross external reserves.
Presenting a paper on the ‘state of the global and domestic economy, major influences and outlooks after the extreme disruption’, he said because the country’s exports are limited by a weak commodities value chain, deficient foreign exchange inflow could put further pressure on the naira.
On the domestic outlook, he said gradual economic recovery is expected to continue in Q3, through Q4 2021, supported by the increase in vaccination coverage as domestic and international economic activities pick up.