The demand for foreign exchange in the third quarter of 2024 dropped primarily due to a significant decline in invisible transactions.

This was indicated in the latest Quarterly Statistical Bulletin published by the Central Bank of Nigeria on its website.

Invisible transactions are non-physical transactions, such as school fees, student maintenance allowances, medical, and other eligible transactions.

The CBN data showed that the total utilisation of foreign exchange by various sectors of the economy fell by -11 per cent quarter-on-quarter to $5.7bn in Q3 2024. However, on a year-on-year basis, the aggregate sectoral utilisation of FX increased significantly by 72 per cent.

The modest dip in Q3 was blamed on the drop in FX usage for invisible transactions, which decreased by 32 per cent q/q to $2.2bn. As a result, its share of total FX usage decreased to 39 per cent, down from 51 per cent recorded in Q2 2024.

Analysing the report, experts at FBNQuest said that FX utilisation by the financial sector, which typically dominates FX usage within the invisible segment, was the major driver behind the marked QoQ decline.

“FX utilised for financial services fell by 34 per cent QoQ to almost $2.0bn,” the report read.

Also, regarding forex consumption for merchandise imports, FX usage increased by 10 per cent QoQ to nearly $3.5bn thus boosting its contribution to total FX utilised to 61 per cent, up from 49 per cent in the previous quarter.

In the industrial sector, FX utilisation for imported raw materials, machinery, and equipment accounted for 53 per cent of the total merchandise goods, making it the largest forex consumer in this category.

Food products emerged as the second-largest category within the merchandise goods segment as they increased by 16 per cent QoQ to $633.6m.

FBNQuest opined that the trend in sectoral utilisation of FX has largely declined since Q1 2023.

“This pattern can be primarily attributed to decreased demand for FX following the significant devaluation of the naira. Looking ahead, we anticipate a modest improvement in FX utilisation by various economic sectors due to increased FX liquidity and improved access to foreign currency resulting from the CBN’s ongoing measures to streamline FX trading and facilitate transparency in the FX market,” the report concluded.

Since the devaluation of the naira, the CBN has introduced various reforms to increase FX liquidity.