The International Monetary Fund (IMF) said the improving trade balance has limited impact on foreign exchange (FX) stress, with parallel market FX premiums remaining in the 35-40% range since October 2021 .
This was revealed during IMF staff meetings with the Nigerian authorities from June 6-10, 2022, to discuss recent economic and financial developments and the country’s economic outlook.
Yesterday, the Naira to US Dollar exchange rate closed at N420/$1 at the Investors and Exporters (I&E) counter. However, the black market maintains a wide closing premium at N607/$1, according to BDC trader insights.
The IMF said real GDP growth is also spreading to all sectors except oil, but inflation remains high. International lenders added that the economic outlook is difficult, with high food prices raising food security concerns.
What the IMF says
“Regarding the external sector, the current account deficit narrowed considerably in 2021, helped by the compression of imports and the increase in the net oil balance. However, the improving trade balance, which has continued so far in 2022, is having a limited impact on FX tensions, with parallel market FX premiums remaining in the 35 to 40% since October 2021. oil prices, gross foreign exchange reserves fell to $38.6 billion at the end of May 2022, after reaching $41.5 billion in September 2021, boosted by the allocation of SDRs and the issue of Eurobonds. The IMF said
International lenders have also pointed to Nigeria’s inflationary pressures and the response of the Central Bank of Nigeria. The IMF said, “Inflation reached 17.7% (y/y) in May, driven by a further spike in food prices, exacerbated by the war in Ukraine, and raising food security concerns, more than 40% of the population living below the poverty line To contain inflationary pressures, the Central Bank of Nigeria recently raised its monetary policy rate by 150 basis points to 13%.
The IMF said the economic recovery continues to strengthen thanks to services and agriculture, with GDP growth reaching 3.6% (y/y) in the first quarter of 2022.
What you should know
- Nigeria’s foreign trade rose to 13 trillion naira in the first quarter of 2022, up 11.1% from 11.7 trillion naira recorded in the previous quarter and up 65.4% from 7.86 trillion naira. naira recorded in the first quarter of 2021. released the foreign trade report for the first quarter of 2022, by the National Bureau of Statistics (NBS).
- Total imports in the first quarter of 2022 totaled 5.9 trillion naira, down 0.67% from the fourth quarter of 2021 (5.94 trillion naira), but up 21.04% from the comparable period of 2021 (N4,880 billion).
- Nigeria’s export earnings in the first quarter of 2022 were 7.1 trillion naira, up 23.1% and 137.9% from 5.77 trillion naira and 2.98 trillion naira in the first and fourth quarters of 2021, respectively.
- Despite the fact that Nigeria’s crude oil production is declining, the huge increase in crude oil prices has enabled it to increase its crude export earnings. Crude oil revenues, for example, rose 175% year-on-year to 5.62 trillion naira from 2.04 trillion naira in the first quarter of 2021.
- Crude oil export earnings accounted for 79.16% of total export earnings in the quarter under review. As a result, Nigeria’s trade balance improved in the first quarter of 2022, with a foreign trade surplus of N1.12 trillion. Nigeria’s trade surplus is at its highest level since the third quarter of 2019.