June 6, 2024/FBNQuest Research

The total value of Foreign Exchange (FX) utilised in the Nigerian economy increased by +21% Q-o-Q to US$4.1bn in Q4 2023, according to the CBN’s latest Quarterly Statistical Bulletin (QSB). However, this figure is approximately -46% Y-o-Y and is the second lowest recorded over the past eight quarters. The modest quarterly growth was primarily driven by a +55% Q-o-Q increase in FX usage for invisible imports, which reached USD1.5bn. FX utilised for merchandise imports accounted for 64% of total FX usage and grew by +21% Q-o-Q to US$2.6bn.

• Concerning goods imports, FX utilised for the importation of goods for the industrial sector accounted for the largest share, totalling US$1.3bn, or about 51% of the total FX used for goods. However, this figure represents a -4% Q-o-Q decline.
• Food products, which increased by +8% Q-o-Q, were the second-largest user of FX within the goods sector at US$493m, accounting for 19% of the total.
• The importation of manufactured products was the next largest user of FX at around US$340bn, or 13% of the total.
• In the invisibles segment, financial services dominated FX usage within the sector, accounting for almost US$1.5bn (+41% Q-o-Q), representing 72% of the total FX used by invisibles.
• Business services, the only other significant user of FX within invisibles, increased by almost +250% Q-o-Q to US$225m.
• As shown by our chart, excluding the uptick in Q4 2023, the broad trend of FX utilisation has been downward since Q4 2022, primarily reflecting the FX liquidity challenges which prevailed at the time.
• Looking ahead, we expect to see higher FX utilisation figures over the next couple of quarters due to the relative improvement in FX access by firms and other FX users due to the reforms introduced by the CBN to improve market liquidity.