The latest data from the Central Bank of Nigeria (CBN) reveals the extent of the dollar supply shortage as Nigerians grapple with one of the worst currency depreciations in recent years.
The data, published in the CBN’s annual bulletin, show that only $9.8 billion was supplied by the central bank through the official Investors’ & Exporters’ (I&E) window for the entirety of 2023.
This figure is the lowest dollar supply recorded since 2017, a year when Nigeria faced a similar foreign currency crisis.
In 2017, the central bank supplied just $9.3 billion to the official segments of the market as dollar inflows dried up following a decrease in crude oil proceeds. Indeed, the year before, in 2016, saw the lowest supply in over a decade at only $6.3 billion.
An analysis of the 2023 data shows that out of the $9.8 billion sold by the apex bank, $6.1 billion—or 62% of the supply—was provided in the first five months of the year, under the Buhari administration with Godwin Emefiele as CBN Governor.
The significant drop in forex supplies perhaps explains the reason for the exchange rate volatility in the second half of the year, which resulted in massive depreciations and a wide disparity between the official and parallel markets.
For instance, according to Naijaonpoint data, as of August 1, 2023, the exchange rate in the official window was quoted at N789/$1, while the parallel market was at N872/$1.
By the end of October 2023, the parallel market had surpassed the psychological thousand-naira mark, trading at N1,150, while the official window had also hit an all-time low of N993.8/$1 (on October 30th, 2023).
As the year drew to a close, another $1.27 billion and $61.7 million were supplied in November and December, respectively.
The exchange rate in both the official and parallel markets closed December at N907/$1 and N1,215/$1, respectively, ending a tumultuous year for the local currency.
Nigeria currently practices a market-driven exchange rate policy where the forces of demand and supply determine the exchange rate.
In response to the forex challenges Nigeria has faced, the Central Bank Governor Olayemi Cardoso provided an overview of the strategies and measures the CBN is implementing.
Governor Cardoso has highlighted a focus on creating an efficient, transparent FX market to foster ease of doing business in Nigeria, which is expected to enhance financial and economic inclusion, particularly for small businesses and households.