FG borrows $1.71bn to boost forex in 2023

Nigeria got $1.71 billion in foreign loans to boost foreign exchange inflow into the country in the first nine months of 2023.

Total capital importation including Foreign Direct Investment, Foreign Portfolio Investment, and others amounted to $2.82 billion in the time under review according to data from the National Bureau of Statistics.

So far, foreign loans have been responsible for 60.80 per cent of foeex inflows into the country.

FX inflows into the country slowed in 2023, total capital importation fell by 33.99 per cent in the period being reported when compared to the $4.27 billion recorded in the corresponding period of 2022. As of the first three quarters of 2022, only 38.56 per cent of forex inflows ($1.65 billion) into the country were loans.

FDI and FPI inflows into the country fell according to the data; FDI and FPI fell from $383.85 million and $2.16 billion to $193.4 million and $843.24 million respectively.

The lack of dollar supply had been blamed for the constant fluctuation of the naira in the foreign exchange market.

Commenting on the capital importation inflow into the country, the NBS said, “In the third quarter of 2023, total capital importation into Nigeria stood at $654.65 million, lower than $1.16 billion recorded in the third quarter of, 2022, indicating a decline of 43.55 per cent. In comparison to the preceding quarter, capital importation fell by 36.45 per cent from $1.03 billion in the second quarter of 2023.

“Other Investment ranked top accounting for 77.56 per cent ($507.77m) of total capital importation in the third quarter of 2023, followed by Portfolio Investment with 13.31 per cent ($87.11 million) and Foreign Direct Investment with 9.13 per cent ($59.77 million).”

When Nigeria floated its currency in June 2023, the expectation at the time was that it would improve forex inflows into the economy. Since then, the naira has lost about 40 per cent of its value according to the World Bank.

Recently, the International Monetary Fund disclosed that the national currency was under pressure. It noted that the country was free to seek a loan from it to stabilise its currency.

In an email response to Economic Confidential, the fund said, ‘Nigeria is facing high inflation of 26 per cent year-on-year in August and pressure on the naira.

“In June, the authorities unified the different official exchange rate windows. This was a welcome step as it will help to strengthen the functioning of the foreign exchange market. We also welcome the CBN’s recent decision to lift the ban on the 43 items previously restricted from accessing foreign exchange from the official window. This is a positive step in the direction of a shift to a market-determined exchange rate regime.”

Recently, the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, noted that the country was expecting about $10bn inflows in the nearest term to help it clear foreign exchange backlog and stabilise the naira.

He noted that the market was illiquid and not functioning properly because there is no supply.

“In addition, from the supply of foreign exchange through NNPC, increased production, reduced expenditure, from transactions such as forward sales, from our discussions with sovereign wealth funds, that are ready to invest and provide advanced alongside that investment, there is a line of sight of $10 billion worth of foreign exchange in the relatively near future in weeks rather months,” Edun said.

To tackle the lingering dollar scarcity in the country, the Nigerian National Petroleum Company Limited, announced that it had secured a $3 billion emergency crude oil repayment loan from the African Export-Import Bank.