Dollars pour into Nigeria as net inflow turns positive for first time since 2012

by | February 12, 2018 1:10 am

More dollars poured into Nigeria than exited through the Central bank in 2017 for the first time since 2012, according to data compiled by BusinessDay and sourced from a report on the apex bank’s website that put net inflows at $12 billion.
The $12 billion net inflow compares with a seven-year average of $568 million within 2010 and 2017.
An equal share of increased inflows and reduced outflows led to the positive net inflow in 2017, as inflows surged 15.59 percent to $41.7 billion from a seven-year average of $36.1 billion between 2010 and 2017, while outflows fell identically by 15.43 percent to $29.1 billion from an average of $34.4 billion.
That’s the first positive net inflow of dollars since 2012, when inflows outpaced outflows by $10.4 billion.
In 2016, outflows outpaced inflows by $914.9 million, while negative net inflows of $252.9 million, $7.3 billion and $1.2 billion were recorded in 2015, 2014 and 2013 respectively.
The rise in external reserves and relative exchange rate stability confirm improved dollar flows to the CBN coffers, while reduced importation and the use of multiple foreign exchange markets relieved pressure on CBN dollars and tamed outflows.
Gross external reserves have jumped some 20 percent to cross the $40 billion mark this year compared to 2016.
The naira has also been relatively stable, averaging N360 per dollar at the Investor and Exporter window this year.
While the trend could easily pass for good news, Bismarck Rewane, an economist and CEO of Lagos-based financial advisory firm Financial Derivatives Company is tapering any over excitement.
“The country may be making progress, but let’s not get carried away because the rising inflows are fuelled by hot money which the economy must do without,” Rewane said.
“Also remember that this money is not solely money earned but also includes that which was borrowed in Eurobonds, so it’s like we are acquiring liabilities,” Rewane added.
According to the CBN report, autonomous sources or portfolio inflows- accounted for $15.7 billion or 51.7 percent of total inflows in the fourth quarter of 2017, while 37 percent or $11.5 billion flowed from non-oil sources.
Oil accounted for 10 percent or $3.2 billion, as global prices recovered and Nigeria’s production stabilised.
Autonomous sources, which Rewane partly describes as hot money, include the $1.8 billion Eurobond sold by Nigeria in 2017 and other portfolio inflows into government debt.
Africa’s biggest oil producer is struggling to raise enough revenue amid the worst economic slump in about 25 years. Gross domestic product expanded from a year earlier in the three months through June after contracting for the previous five quarters.
Acute dollar shortages that were exacerbated by capital controls in 2016 sent investors fleeing, but dollars are gradually trickling in again with the creation of a market driven window in April 2017 which has made Nigerian assets attractive again in the eyes of foreign investors.
A barrel of Brent crude fell 3.7 percent to $62.4 per barrel Friday, as oil headed for its worst week in almost a year as the global risk-asset rout troubled investors already concerned over growing U.S. supply.
Oil’s weakness so far this month follows the best start to the year in over a decade.
Autonomous inflow jumped by 7.7 per cent and 64.6 per cent, above the levels in the preceding quarter and the corresponding period of 2016, respectively.
Non-oil public sector inflow rose by 30.3 per cent and 141.2 per cent, above the levels at the end of the third quarter of 2017 and the corresponding period of 2016, respectively.
Oil sector receipts in the fourth quarter compares with US$3.17 billion and US$1.97 billion in the third quarter of 2017 and the corresponding period of 2016, respectively.
On the flip side, reduced importation, the creation of the Investor and Exporter window (which is largely greased by foreign investors) helped put less pressure on the CBN dollar coffers in 2017, taming outflows and contributing to the positive net flow, analysts say.
“The decline in outflow relative to the preceding quarter reflected the fall in inter-bank utilisation, 3rd party MDAs transfer, drawings on letters of credits, external debt service and foreign exchange special payment in the review period,” the CBN noted.