Economy
Nigeria’s foreign exchange crunch worsen as inflows slow
Central Bank of Nigeria has said that the nation had a total foreign exchange inflow of $72.4 billion in 2022. This fact is contained in the apex bank’s quarterly data in its statistical bulletin for Q4 2022. Foreign exchange inflow for the period marked a 23.3 per cent decline compared to the $94.3 billion recorded in 2021 and also a 37.4% decline compared to $115.6 billion received in 2020. The situation is feared to be going worse in the first and second quarter of 2023 for which data are yet to be released. A breakdown of the data showed that $29.89 billion came into the country through the CBN, while $42.49 billion came in through autonomous sources. Conversely, a total of $40.99 billion was recorded as outflow in the same period, slightly lower than the $41.62 billion recorded in the previous year. This indicates a net surplus of $31.39 billion in the review year.
Nigeria has since been witnessing recurrent decline in dollar inflow into the economy, on the back of decline in foreign direct and portfolio investments. According to data from the National Bureau of Statistics (NBS), capital importation declined by 20.5% to $5.33 billion in 2022. A further breakdown showed that foreign direct investment (FDI) in Nigeria dropped by 33% to $468.1 million compared to $698.87 million recorded in the previous year. Similarly, foreign portfolio investment declined by 27.9% to $2.44 billion in the review year. CBN’s dollar supply in the FX market has been impacted by the drying inflows of dollar into the Nigerian economy. Data from the CBN revealed that a total of $15.27 billion was supplied by the CBN into the economy, all of which were supplied to I&E window, SME, and Invisibles.
Compared to the previous year, FOREX supply declined by 15.3% from $18.03 billion recorded in 2021 and 31.1% drop from $22.16 billion supplied in 2020. The decline in the amount of foreign exchange supplied by the CBN is partially attributed to the halt of sales to Bureau De Change (BDC) operators in previous year. In the review year, the apex bank made no sale of dollar to BDCs, compared to $2.77 billion and $5.33 billion recorded in 2021 and 2020 respectively. The decline in foreign exchange inflows has also affected the nation’s external reserves as the apex bank continues to defend the Naira and fund import bills at the expense of the reserve level. Nigeria’s external reserves declined by $3.44 billion in 2022 to close at $37.1 billion. Furthermore, the reserves level has dropped to $35.22 billion as of 10th May 2023.
Nigeria continues to experience decline in FX inflows following the impact of the COVID-19 pandemic on the world economy. This has had a ripple effect on the performance of the Naira at the official and black market. Despite the interventions by the CBN in the official Investors and Exporters window, the Naira depreciated by 5.7% against the US dollar in 2022, while the exchange rate trend in the same direction at the black market by 23.1%. The industrial sector received a sum of $8.68 billion in 2022 from the CBN to fund their imports, accounting for 47.6% of the total FX supplied for import use. The manufacturing sector, followed with $3.89 billion, representing 21.3% of the total. Others include, food products ($2.77 billion), oil sector ($1.41 billion), minerals ($664.7 million), transportation ($521.11 million), and agriculture ($286.75 million). In terms of invisibles, most of the funds were allocated to financial services, as they received a whopping $8.32 billion in 2022, accounting for 70.7% of the total amount, followed by educational services and business services with $1.01 billion (8.6%) and $937.8 million (8%) respectively.
The CBN also continues to adopt its policies towards increasing foreign exchange inflows into the country, especially through non-oil export. Although the impact of Naira4Dollar scheme, which offers recipients of diaspora remittances through CBN’s IMTOs to be paid N5 for every $1 received as remittance inflow. In the same vein, the RT 200 FX programme, which is aimed getting $200 billion in Foreign Exchange earnings over the next 3-5 years from non-oil proceeds is also ongoing and is expected to improve FX inflows in the Nigerian economy, in the short to medium term. According to the CBN, foreign exchange repatriation attributed to the RT 200 FX programme increased by 40% to $ 5.6 billion 2022.from $3.0 billion in 2021. He also noted that the year 2023 has started strongly and showing impressive prospects. In the first quarter of 2023, a total of $1.7 billion was repatriated to the economy while about $970 million was sold at the I&E window year-to-date.
The Arab Africa Trade Bridges (AATB) Program and the Federal Republic of Nigeria formalized a partnership with the signing of the AATB Membership Agreement, officially welcoming Nigeria as the Program’s newest member country. The signing ceremony took place in Abuja on the sidelines of the 5th AATB Board of Governors Meeting, hosted by the Federal Government of Nigeria.
The Membership Agreement was signed by Eng. Adeeb Y. Al Aama, the CEO of the International Islamic Trade Finance Corporation (ITFC) and AATB Program Secretary General, and H.E. Mr. Wale Edun, Minister of Finance and Coordinating Minister of the Economy, Federal Republic of Nigeria. The Agreement will provide a strategic and operational framework to support Nigeria’s efforts in trade competitiveness, promote export diversification, strengthen priority value chains, and advance capacity-building efforts in line with national development priorities. Areas of collaboration will include trade promotion, agribusiness modernization, SME development, businessmen missions, trade facilitation, logistics efficiency, and digital trade readiness.
The Honourable Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, called for deeper trade collaboration between African and Arab nations, stressing the importance of value-added Agribusiness and industrial partnerships for regional growth. Speaking in Abuja at the Agribusiness Matchmaking Forum ahead of the AATB Board of Governors Meeting, the Minister said the shifting global economy makes it essential for African and Arab nations to rely more on regional cooperation, investment and shared markets.
He highlighted projections showing Arab-Africa trade could grow by more than US$37 billion in the next three years and urged partners to prioritize value addition rather than raw commodity exports. He noted that Nigeria’s growing industrial base and upcoming National Single Window reforms will support efficiency, investment and private-sector expansion.
“This is a moment to turn opportunity into action”, he said. “By working together, we can build stronger value chains, create jobs and support prosperity across our regions”, Edun emphasized. “As African and Arab nations embark on this journey of deeper trade collaboration, the potential for growth and development is vast. With a shared vision and commitment to value-added partnerships, we can unlock new opportunities, drive economic growth, and create a brighter future for our people.”
Speaking during the event, Eng. Adeeb Y. Al Aama, Chief Executive Officer of ITFC and Secretary General of the AATB Program, stated: “We are pleased to welcome Nigeria to be part of the AATB Program. Nigeria stands as one of Africa’s most dynamic and resilient economies in Africa, with a rapidly expanding private sector and strong potential across agribusiness, energy, manufacturing, and digital industries. Through this Membership Agreement, we look forward to collaborating closely with Nigerian institutions to strengthen value chains, expand regional market access, enhance trade finance and investment opportunities, and support the country’s development priorities.”
The signing of this Agreement underscores AATB’s continued engagement with African countries and its evolving portfolio of programs supporting trade and investment. In recent years, AATB has worked on initiatives across agribusiness, textiles, logistics, digital trade, export readiness under the AfCFTA framework, and other regional initiatives such as the Common African Agro-Parks (CAAPs) Programme.
With Nigeria’s accession, the AATB Program extends it’s presence in the region and adds a key partner working toward advancing trade-led development and fostering inclusive economic growth.
Federal Executive Council (FEC) has approved the 2026–2028 Medium-Term Expenditure Framework (MTEF), a key fiscal document that outlines Nigeria’s revenue expectations, macroeconomic assumptions, and spending priorities for the next three years. The approval followed Wednesday’s FEC meeting presided over by President Bola Tinubu at the State House, Abuja. The Minister of Budget and Economic Planning, Senator Atiku Bagudu made this known after the meeting.
The Minister said the Federal Government is projecting a total revenue inflow of N34.33 trillion in 2026, including N4.98 trillion expected from government-owned enterprises. Bagudu said that the projected revenue is N6.55 trillion lower than earlier estimates, adding that federal allocations are expected to drop by about N9.4 trillion, representing a 16% decline compared to the 2025 budget.
He said that statutory transfers are expected to amount to about N3 trillion within the same fiscal year. On macroeconomic assumptions, FEC adopted an oil production benchmark of 2.6 million barrels per day (mbpd) for 2026, although a more conservative 1.8 mbpd will be used for budgeting purposes. An oil price benchmark of $64 per barrel and an exchange rate of N1,512 per dollar were also approved.
Bagudu said the exchange rate assumption reflects projections tied to economic and political developments ahead of the 2027 general elections. He said the exchange rate assumption took into account the fiscal outlook ahead of the 2027 general elections.
The minister said that all the parameters were based on macroeconomic analysis by the Budget Office and other relevant agencies. Bagudu said FEC also reviewed comments from cabinet members before approving the Medium-Term Fiscal Expenditure Ceiling (MFTEC), which sets expenditure limits. Earlier, the Senate approved the external borrowing plan of $21.5 billion presented by President Tinubu for consideration The loans, according to the Senate, were part of the MTEF and Fiscal Strategy Paper (FSP) for the 2025 budget.
The spot rate on Nigerian Treasury bills has been increased by 146 basis points by the Central Bank of Nigeria (CBN) following tight subscription levels at the main auction on Wednesday. The spot rate on Treasury bills with one-year maturity has now surpassed Nigeria’s 16.05% inflation by 145 basis points following a recent decision to keep the policy rate at 27%.
The Apex Bank came to the primary market with N700 billion Treasury bills offer size across standard tenors, including 91-day, 182-day and 364 day maturities. Details from the auction results showed that demand settled slightly above the total offers as investors began to seek higher returns on naira assets despite disinflation.
Total subscription came in at about N775 billion versus N700 billion offers floated at the main auction. The results showed rising appetite for duration as investors parked about 90% of their bids on Nigerian Treasury bills with 364 days maturity. The CBN opened N100 billion worth of 91 days bills for subscription, but the offer received underwhelming bids totalling N44.17 billion.
The CBN allotted N42.80 billion for the short-term instrument at the spot rate of 15.30%, the same as the previous auction. Total demand for 182 days Nigerian Treasury bills settled at N33.38 billion as against N150 billion that the authority pushed out for subscription. The CBN raised N30.36 billion from 182 days bills allotted to investors at the spot rate of 15.50%, the same as the previous auction.
Investors staked N697.29 billion on N450 billion in 364-day Treasury bills that was offered for subscription. The CBN raised N636.46 billion from the longest tenor at the spot rate of 17.50%, up from 16.04% at the previous auction.
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