The Nigerian local currency tumbles by 0.12% at the Investors’ and exporters’ foreign exchange market on Thursday, a day after the World Bank reports that despite headwinds global remittance improves by 5% but foreign currency remittance into Nigeria will slow down.
In 2021, remittance into Africa’s largest economy surged 13.2% year on year to $19.5 billion. Meanwhile, total remittance into the country is expected to print at $20.945 billion in the current year, representing 4.2% of Nigeria’s gross domestic product (GDP).
At the investors’ and exporters’ FX window on Thursday, the Nigerian naira lost 0.12% against the United States (US) dollar, falling to N445.83 from N445.30 on Wednesday on account of higher demand for foreign currencies by market participants.
Conversely, the local currency appreciated 1.30% against the greenback in the parallel market in the absence of speculative demand, from N765 to N755, according to traders, thus narrowing down the gap between official and parallel market rates.
Meanwhile, an exchange rate of N447 to the dollar was the highest rate recorded within the day’s trading before it settled at N445.30. The naira sold for as low as 440 to the dollar within the day’s trading.
A total of 177.44 million dollars was traded in foreign exchange at the official Investors and Exporters window, according to market data. Data from the central bank of Nigeria show that external Reserves remain tight at $37.11 billion following periodical spending by the CBN to defend the naira from free falling in the FX market.
It appears dollar inflow has however helped to keep the external reserves solid, covering about 10-month import despite low accretion from oil exports.
Earlier in the week, the apex bank said Nigeria raked in $4.99 billion from non-crude oil exports. The Finance Ministry had shed plan to borrow from the international debt capital market following the central bankers’ interest rate hikes.
With a slowdown across sources including, foreign direct investment, and hot monies, the external reserve has been under pressure, though strong enough to defend the local currency amidst rising imports in Nigeria.
Analysts said Nigeria’s financial market remains uncompetitive for foreign investors following the Federal Reserve’s hawkish rendition, the European Central Bank’s persistent rate hikes and the Bank of England’s monetary policy tightening.
In a report, the World Bank predicts a slowdown in remittance growth into Nigeria after dollars remitted into the country by Nigerians living abroad surged by 7.5% to $19.5 billion in 2021, consolidated strongly in the first quarter of 2022 before it slowdown in the second quarter.
Nigeria, the largest recipient of remittances in the sub-Saharan region which witnessed a sharp recovery in flows during 2021, maintained the improved momentum of 2021 into the current year.
The report noted that remittance inflow growth fell in the second quarter of the year to 0.5 percent vis-à-vis the same period of 2021. Meanwhile, dollar remittance inflow value at $20.945 billion hit the local economy in the year, according to World Bank data.
Nigeria is reaping little benefit from the surge in crude oil prices, while the expatriate community faces real income losses in the United States, the United Kingdom, and the Euro Area.
From 13.2% in 2021, World Bank said a falloff in remittance flows to 7.5 percent is likely for Nigeria in the year 2022 and anticipates seeing continued moderation inflows to a 4.5 percent pace in 2023.
World Bank said countries that experienced scarcity of foreign exchange and multiple exchange rates, officially recorded remittance flows declined as flows shifted to alternative channels offering better exchange rates.
The top five recipient countries for remittances in 2022 are expected to be India, establishing a benchmark of $100 billion in the year, followed by Mexico with a tally of $60 billion (which replaced China in the second position during 2021), and China, the Philippines, and the Arab Republic of Egypt, World Bank said.