Net Forex Inflows Dip in Q3
The Central Bank of Nigeria (CBN) has reported a 2.97% decline in net foreign exchange inflows for the third quarter of 2024, dropping to $14.46 billion from $14.89 billion in the preceding quarter. Despite the dip, the net inflow marked a significant year-on-year increase of 75.91% from $8.22 billion in Q3 2023.
Foreign exchange inflows grew marginally by 3.01% to $22.89 billion, while outflows surged 15.18% to $8.43 billion. Notably, inflows through the CBN increased by 39.63%, contrasting with a 19.66% drop from autonomous sources. This uneven distribution highlighted shifts in Nigeria’s forex dynamics.
Diaspora Remittances Surge
Diaspora remittances processed via International Money Transfer Operators soared to $4.22 billion between January and October 2024, nearly doubling the $2.62 billion recorded during the same period in 2023. Monthly remittances rose from $336 million in September to $402 million in October, showcasing growing confidence in Nigeria’s remittance systems.
CBN Governor Olayemi Cardoso attributed this growth to improved remittance efficiency, economic policies under President Bola Tinubu, and enhanced trust from the Nigerian diaspora.
Exchange Rate and External Reserves Update
The Nigerian Autonomous Foreign Exchange Market experienced a 14.62% depreciation in the average exchange rate, falling to ₦1,588.64/$ in Q3 from ₦1,385.96/$ in Q2 2024. Concurrently, external reserves climbed to $39.29 billion by the end of September, capable of financing 8.91 months of imports for goods and services.
This reserve growth, attributed to improved trade surpluses and domestic crude production, signals stronger external sector performance amid global economic headwinds.
Inflation Pressures Persist
Inflation in Nigeria remained elevated at 34.60% in November 2024, driven by rising food and energy costs. This marks a slight increase from October’s rate of 33.88%. The CBN predicts that inflation will remain high due to ongoing policy reforms impacting energy and transport costs.
However, stable forex conditions and continuous agricultural harvests are expected to moderate inflationary pressures in the coming months.
Fiscal and External Sector Outlook
The CBN report projects a bright fiscal outlook for Nigeria, buoyed by reforms that are reducing deficits and boosting revenue collection. The domestic crude oil sector, supported by the operationalization of the Dangote and Port Harcourt refineries, is anticipated to further strengthen the economy.
Global economic improvements, including easing inflation in advanced economies, are also likely to support Nigeria’s trade and investment activities. However, risks such as fluctuating crude oil prices and low production levels pose challenges.
Conclusion
Nigeria’s Q3 2024 economic performance paints a complex picture of resilience and challenges. While forex inflows saw a slight dip, increased remittances and robust external reserves offer a positive outlook. Sustained fiscal reforms and stable forex markets remain crucial for navigating inflation and external risks in the near term.
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