The Central Bank of Nigeria (CBN) recently released annual activity report for 2017. The report shows a total of $9.7 billion was sold as foreign exchange in 2017. This represents a 19.1% drop from $12.0 billion sold in 2016.
Interbank sales were dominant
Nigerian Autonomous Foreign Exchange Fixing (NAFEX) sales accounted for $622 million or 6.3% of the total amount of the foreign exchange sold. In this window, the supply of foreign exchange is by portfolio investors and exporters, hence it is simply known as the I and E window.
Sales to the invisibles accounted for $1.3 billion or 14.3%. Invisible foreign exchange transactions include school fees, medical bills, personal and basic travel allowances.
FX sales to Small and Medium Scale Enterprises (SMEs) amounted to $1.06 billion or 10.9%. SMEs bore a large brunt of the foreign exchange crisis in 2015/2016, hence the agitation for and subsequent approval of an FX window for them.
Interbank sales took the greatest chunk, amounting to $6.0 billion or 62.6% of foreign exchange sold within the year.
Two key months
May 2017, was the month in which the largest amount of foreign exchange ($2 billion) was sold.
In October, sales were negative at $88.87 million.
Less FX Pressure
The year-on-year drop in foreign exchange could be as a result of less demand by individuals and businesses.
2015/2016 was marked by the reluctance of the CBN to devalue the Naira despite the reduced foreign exchange income.
The apex bank also embarked on on-demand control measures such as the placement of several items that had been hitherto imported, on a banned list.
Commercial banks in the country in some cases halted the use of Naira master cards abroad or reduced their limits.
2017, however, was marked by a gradual uptick in crude oil prices and production volumes in the country.
CBN also relaxed its restrictions and began the introduction of several foreign exchange windows. First for invisibles, then SMEs, followed by NAFEX.
Foreign exchange reserves have since rebounded and are projected to hit $50 billion before the end of 2018.