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According to the latest data from the Central Bank of Nigeria, there was a 42% decrease in the demand for foreign exchange for importation and other forex-related activities by individuals and companies.
The total allocation of forex to 19 sectors and services in 2023 was $21.12bn, which was 41.9% lower than the $29.98bn allocated in 2022. These financial statistics were reported in the CBN's quarterly statistics report.
Forex allocation involves the distribution of foreign exchange by the CBN to various sectors of the economy, such as individuals, businesses, and government agencies, based on specific criteria and priorities.
In June 2023, the CBN implemented a floating exchange rate system for the naira, unifying all forex market segments, resulting in a significant depreciation of the domestic currency against the US dollar and other global currencies.
The CBN announced the abolition of segmentation in the Nigerian Foreign Exchange Market, consolidating all segments into the Investors and Exporters window.
The devaluation of the naira resulted in a rapid decrease in its value, dropping from 471/$ to approximately 1,485/$ at the Investors and Exporters FX window. This fluctuation in the exchange rate led to a further decline in the naira's value at the parallel market, reaching 1,500/$ last week.
The narrowing gap between the official and parallel markets has prompted importers to reduce their demand for foreign exchange, impacting various sectors such as manufacturing, healthcare, education, and travel expenses.
Financial analysts have also suggested that the situation may be due to inadequate forex liquidity from the central bank, causing buyers to turn to the parallel market.
According to reports, the Central Bank of Nigeria (CBN) disbursed $14.27 billion for the import of raw materials and spare parts, as well as $6.84 billion for invisible services in 2023, marking a decrease from the previous year's allocation of $18.2 billion for imports and $11.76 billion for invisible services.
These funds were allocated to sectors including industrial, transport, agricultural, and oil sectors.
The bank provided foreign exchange for a variety of imports, including food products, manufactured goods, and minerals. In terms of invisible transactions, the bank released foreign exchange for a wide range of business and service sectors such as communication, construction, distribution, education, finance, health, tourism, recreation, and transportation.
The monthly breakdown of foreign exchange release was as follows: $2.62bn in January 2023, $1.94bn in February, $2.96bn in March, $1.78bn in April, $2.36bn in May, $2.11bn in June, $1.02bn in July, $1.15bn in August, $1.13bn in September, $1.1bn in October, $1.61bn in November, and $1.34bn in December.
