Concerns Mount Over Nigeria’s Economy Despite a 2.9% Increase in August Foreign Exchange Inflows

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In August 2023, Nigeria experienced a 2.9% increase in net foreign exchange inflows, reaching US$2.33 billion compared to July.

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The surge was driven by heightened inflows from autonomous sources, according to the Central Bank of Nigeria (CBN). However, concerns arose as external reserves decreased by 0.99% to US$32.98 billion.

The reserves could cover 6.3 months of imports, exceeding the 100.0% threshold for short-term debt.

Aggregate foreign exchange inflow rose by 5.8% to US$5.71 billion, while outflows increased by 8.0% to US$3.38 billion in August.

The naira appreciated against the US dollar by 1.1%. Despite positive indicators, there are concerns about a confidence crisis in the foreign exchange market and economic challenges, including depreciating exchange rates and rising energy costs.

Marvelous Adiele of Parthian Partners highlighted limited USD supply impacting banks’ ability to meet customer demands, leading to a widening gap between parallel and official market rates.

Addressing USD supply issues becomes crucial for stability.

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