Foreign exchange inflow through CBN drops by 5.25%

Temitope Adebayo

The Central Bank of Nigeria (CBN) on Thursday said the foreign exchange inflow into the country dropped by 5.25 per cent in second half (H2) year of 2018 to $28.9 billion from $30.51 billion reported in the first half (H1) of 2018.

The financial stability report by CBN disclosed that that foreign exchange outflow increased from $22.94 billion in the H1 2018 to $33.39 billion in H2 2018, an increase of 45.54 per cent.

The report that was released on Thursday explained that the sources of inflow were mainly from crude oil sales, treasury single account, investment income and other official receipts.

According to the report, the aggregate credit to the domestic economy (net) grew by 6.42 per cent to N27,594.16 billion at H2 2018 as against the decline of 16.29 per cent at H1 2018.

The report explained that the growth in aggregate credit was attributed to the 33.77 and 1.96 per cent increases in net claims on the federal government and claims on the private sector, respectively.

The financial stability report stated that, “Consequently, aggregate credit to the domestic economy (net) contributed 5.8 percentage points to the growth in M3 at end-December 2018.

“Net claims on the Federal Government increased to N4,867.52 billion at H2 2018, compared with N2,805.01 billion at H1 2018, reflecting the growth in holdings of government securities by banks.”

The report said that banking system credit to the private sector increased by 1.96 per cent to N22.7trillion billion at H2 2018, in contrast to a decline of 0.04 per cent at H1 2018.

“The increase was due to the 1.98 and 0.57 per cent growth in claims on the core4 private sector and state and local governments, respectively.

”Credit to the private sector fell by 1.35 per cent to N15,134.20 billion, compared with N15,340.93 billion at end-June 2018. Industry sub-sector accounted for the highest share of total credit to the private sector at end-December 2018, representing 41.00 per cent, compared with 38.50 per cent in the preceding half year. The Concentration Ratio (CR) of the six largest banks with respect to deposits and assets stood at 60.31 and 59.74 per cent at end-December 2018, compared with the 57.68 and 63.68 per cent recorded at end-June 2018, respectively. The market shares of the largest bank with respect to deposits and assets stood at 13.54 and 14.35 per cent respectively.

“The remaining twenty banks had market shares ranging from 0.09 to 4.89 per cent, in deposits, and 0.14 to 4.89 per cent in assets, reflecting the skewed structure of the banking industry.

The Herfindahl-Hirschman Index (HHI)7 for the industry stood at 783.35 and 774.58 for deposits and assets at end-December 2018, compared with 846.14 and 732.72 at end-June 2018, respectively, indicating high concentration.

“The total foreign exchange sale by the Bank in the second half of 2018 was $16,168.52 million. Of this sum, the interbank spot sales accounted for $1,898.34 million, invisibles, $812.70 million, I & E, $812.70 million and SMEs, $678.50 million. Inter-bank forward sales amounted to US$5,743.42 million, while forwards that matured amounted to US$4,718.68 million and US$2,760.51 million was outstanding.

“In the first half of 2018, the total CBN foreign exchange sale at the inter-bank segment was US$9,508.25 million. Of this, spot sales accounted for $1,554.76 million; invisibles, $1,768.70 million; SMEs, US$637.00 million; I & E, $1,236.69 million; and inter-bank forwards, US$5,311.10 million.

“The notional amount of the OTC FX Futures totalled $3,911.47 million in the second half of 2018, compared with $3,965.68 million in the first half of 2018. The sum of $3,508.81 million Futures matured, while $4,772.35 million remained outstanding at end-December, 2018, compared with $2,914.86 and $4,369.69 million, respectively in the first half of 2018.”