The Central Bank of Nigeria (CBN) in its recently released monthly economic report for April 2020 showed that Nigeria’s foreign exchange (forex) FX inflow tanked by 25% to USD9.72 billion in April, from USD12.15 billion in March.
According to CBN, the sharp decline in forex inflow was due to the lower crude oil revenue as the price of crude per barrel plummeted to USD14.30 in April from USD32.30 in March given the weak global crude oil demand amid lockdown of most economies due to COVID-19 pandemic fears.
On the other hand, forex outflow from CBN fell by 55.1% to USD3.29 billion in April, from USD7.32 billion in March. CBN noted that the moderation was driven, chiefly, by the 69.3% decline in interbank utilisation.
Also, CBN stated that it substantially reduced funding at the I&E FX Window and withdrew intervention at the Bureau de Change (BDC) window in the month of April 2020. Following the decline in interbank utilisation, the significant funding reduction at the I&E FX Window and the non-intervention in the BDC market, CBN printed a net inflow of USD6.43 billion in April, higher than the USD5.63 billion net fx inflow recorded in March 2020.
On the foreign scene, the US crude oil input to refineries moderated week-on-week by 1.16% to 14.49 mb/d as at August 14, 2020 (and lower by 18.14% to 17.70 mb/d printed on August 16, 2019).
However, as the U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) fell w-o-w by 0.32% to 512.45 million barrels (but higher by 17.05% from 437.78 million barrels as at August 16, 2019), WTI crude price rose w-o-w by 1.37% to USD42.82 a barrel.
Elsewhere, Europe’s Brent crude rose by 0.22% to USD45.06 a barrel; however, Nigeria’s Bonny Light crude moderated by 1.29% to USD44.05 a barrel as at Thursday, August 20, 2020.
Meanwhile, we note that the increased net fx inflow into Nigerian economy in April 2020 may not be sustained going forward as the gradual reactivation of local economic activities, especially reopening of an international flight, and possible reintroduction of the sale of foreign currency to BDC in order to suppress further depreciation of the Naira against the USD would increase the need for forex.
Cowry Asset Research