…As FX reserves surpass $40bn mark
By Chinwendu Obienyi
The Central Bank of Nigeria (CBN) facilitated international payments totaling $4.36 billion in the first seven months of 2024, marking an 11.3% increase year-on-year from $3.92 billion during the same period in 2023.
This is according to data obtained from the CBN’s website over the weekend.
The growth was mainly fueled by a sharp rise in foreign debt service and repayments, which made up 63.8% of the total, climbing by 53.6% to $2.78 billion from $1.81 billion in the previous year.
This increase is attributed to payments on matured multilateral and bilateral loans.
The significant rise in foreign debt servicing, which has increased by 53.6% to $2.78 billion, places a considerable strain on Nigeria’s foreign reserves.
According to financial analysts, sustained outflows for debt payments can reduce reserve levels, impacting the CBN’s ability to manage exchange rate stability, support imports, and provide foreign currency liquidity in the market.
The data further revealed that letters of credit payments declined by 57.0% to $391.91 million (from $912.36 million in 7 months of 2023, reflecting lower import levels amid weakened consumer demand due to inflation.
Similarly, direct remittances also saw a slight drop of 0.8%, totaling $1.18 billion, as payments for international services by Nigerian residents decreased.
The decline in payments for letters of credit (down by 57.0%) indicates lower import activity, partly due to reduced consumer demand under high inflationary pressures.
Cordros Research in an email note, said the trend reflects a subdued non-oil import sector, which could impact sectors reliant on imported goods and materials.
It also said that businesses in retail and manufacturing might struggle with inventory shortages, affecting production, supply chains, and potentially leading to price increases.
“Looking ahead, we expect international payments to remain elevated, driven by the FG’s debt repayment and servicing obligations. Elsewhere, we expect payments for letters of credit to stay subdued as naira depreciation and fragile consumer demand induced by high inflation continue to suppress total non-oil imports”, they said.
Meanwhile, the country’s foreign exchange reserves surpassed $40 billion for the first time in nearly three years, rising by $270.10 million week-on-week to $40.04 billion as of November 6.
Despite this growth, the naira faced a 0.7% week-on-week depreciation in value, reaching N1,678.87/$1 at the Nigerian Autonomous Foreign Exchange Market (NAFEM) despite the Central Bank of Nigeria’s (CBN) intervention by selling approximately $51 million to authorized dealers.
However, the naira strengthened its hold at the parallel market, gaining 0.03% to close at N1,720/$1.