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Nigeria Recorded U.S.$24.12 Billion 2014 Q4 Net Inflow - CBN Report

May 16, 2014

Kingsley Ighomwenghian

Data from the Central Bank of Nigeria (CBN), shows that at the end of the 2014 fourth quarter, the nation recorded $35.34 billion total foreign exchange inflows to the economy, a drop of 8.2 per cent, when compared with $38.49 billion recorded in the previous quarter.

The CBN in the latest edition of its **External Sector Development Report** for fourth quarter 2013, said inflows through official sources (CBN) dropped by 20.2 per cent from $11.86 billion to $9.47 billion. Drop in inflows through autonomous sources declined by a smaller 2.9 per cent margin to $25.88 billion, just as outflows in in the period decreased by 13.1 per cent to $11.22 billion as against US$12.91 billion.

According to the report produced by the apex bank's Economic Policy Directorate, showed that "a lower net inflow of $24.12 billion was recorded in the 2013 fourth quarter, compared with $25.59 billion in the third 2013, indicating a decline of 5.7 per cent."

The CBN also put foreign direct investment and portfolio inflows for the period at $4.94 billion, as aggregate foreign capital inflow in- creased by 24.3 per cent from $3.97 billion, "owing to an increase in both direct and portfolio investment inflows."

Direct investment and portfolio investment inflows rose by 16.1 and 26.6 per cent from US$0.86 billion and US$3.11 billion in Q3 2013 to $1.00 billion and $3.94 billion, respectively.

Within the period, the report said portfolio investment inflow contributed the lion's share, accounting for 79.7 per cent of total, while direct investment inflows was 20.3 per cent.

"The higher inflow of foreign capital in the 2013 fourth quarter was a welcome development, which should be sustained through macro-economic stability and enhanced investment environment including good corporate governance," the report added

The stock of Nigeria's external reserves at $42.85 billion at year end, according to the report, compared with $44.11 billion in the preceding quarter, indicating a depletion of US$1.26 billion.

"The observed depletion in external reserves was due largely to the sales of foreign exchange to authorised dealers, payments to public sector and debt service payments."

Also, the CBN said the bulk of Nigeria's external reserves continued to be held in US$, at $35.94 billion, or 83.9 per cent of total during the period; followed by Euro, $2.53 billion (or 5.9 per cent), SDR units, $2.58 billion (6.0 per cent), Chinese Yuan US$0.90 billion (2.1 per cent), and GB Pounds US$0.89 billion (2.1 per cent).

Sectoral utilisation of foreign exchange during the review period stood at $13.66 billion from $14.64 billion in previous quarter, comprising $6.79 billion and US$6.87 billion for visible and invisible trade, compared with $7.73 billion and $6.90 billion, respectively, recorded in Q3 2013.

Analysis of foreign exchange utilized by sectors in the review period revealed that US$6.79 billion was spent on the importation of various items into the country compared with US$7.73 billion utilized in Q3 2013.

The importation of industrial goods gulped 32.5 per cent of total, oil constituted 27.2 per cent; while food and manufactured products utilized 15.9 and 15.6 per cent of the total respectively.

"Further analysis revealed that US$6.87 billion was utilized for services of which financial services (banking and other financial services) accounted for 82.9 per cent, while the share of transport, business and communication services constituted 5.8, 5.8 and 2.2 per cent, respectively."

The CBN noted that in the fourth quarter of 2013, Nigeria's external sector "remained vulnerable to global shocks evidenced by increased exposure to short term capital, rising ex- ternal debt and high demand pressure that resulted in the depletion of external reserves by 2.9 per cent.

"In order to reduce vulnerability in the sector, policy redress should be directed towards sustained macroeconomic stability, reduced infrastructural deficit by up-scaling the power sector output to increase domestic production and curtail the relatively high level of importation. The renewed pressure in the for- eign exchange market with the premium exceeding the benchmark level remained worrisome, thus, market dynamics should be adequately situated. In addition, securing of new loans must be on self-sustaining projects."

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Source: AllAfrica

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