Naira is Rising”: Dollar Demand Drops as Traders Quote New FX Rates in Official Markets
- CBN data shows that the demand for dollars dropped by 11% to $5.7 billion in the third quarter of 2024
- The move shows an 11% decline in dollar demand by various sectors of the Nigerian economy
- Reports say the largest consumer of FX in the review remained manufacturing and food imports
Legit.ng’s Pascal Oparada has reported on tech, energy, stocks, investment and the economy for over a decade.
Demand for the US greenback declined by 11% to $5.7 billion in Q3 of last year due to a decline in invisible transactions.
The development signals a remarkable drop in the previous quarter as forex uses non-physical transactions dropped by 32% to $2.2 billion.
Source: Getty Images
Invisible transactions reduce FX demands
Data from the Central Bank of Nigeria shows that invisible transactions now account for 39% of the total FX use from 51% in Q2 of 2024.
The financial sector drove the decline in FX demand during the review period, as the industry's FX consumption plummeted by 34% per quarter, hitting almost $2.0 billion.
In contrast, FX demand for merchandise imports increased moderately by 10% per quarter, increasing to almost $3.5 billion.
The increase in physical products took the share of merchandise imports to 61%, from 49% in the previous quarter.
According to a BusinessDay report, demand by various sectors dropped by 11% to $5.7 billion in Q3 2024 due to a reduction in invisible transactions.
The industrial sector drives FX consumption
The CBN data shows that the industrial sector emerged as the largest consumer of FX, accounting for 53% of the total FX used for imported raw materials, machinery, and equipment.
Also, FX demand for food imports rose by 16% per quarter to $633.6 million.
FX inflows by IMTOs surges
A previous report by Legit.ng shows that CBN reported a 63.7% spike in inflows via IMTOs in the first three quarters of last year.
CBN’s latest quarterly bulletin disclosed that inflows increased from $2.33 billion in 2023 to $3.82 billion in 2024.
The surge has been attributed to several reforms introduced by the CBN under Olayemi Cardoso.
Yearly analysis of the data shows a consistent rise in monthly remittance inflows throughout the year.
CBN’s new policy helps naira’s value to rise by over N100
Meanwhile, Legit.ng reported that the Nigerian naira has seen a notable recovery, appreciating by N125 against the US dollar within a month of the official launch of the Electronic Foreign Exchange Matching System (EFEMS).
Data from the Central Bank of Nigeria (CBN) revealed that the naira has strengthened by 8% or N125 since the day the EFEMS system became operational.
At the EFEM launch on December 2, 2023, the dollar was quoted at N1,660 in the official market.
Source: Legit.ng
