Nigerians’ reliance on imported food products surged in the third quarter of 2024, as foreign exchange (FX) demand for the sector climbed by 16% quarter-on-quarter (q/q) to $633.6 million, according to data from the Central Bank of Nigeria (CBN)’s quarterly statistical bulletin.
The sharp increase contrasts with an overall decline in FX demand across other sectors, underscoring rising costs or heightened dependency on food imports.
The apex bank reported that while food products saw a notable rise in FX demand, overall FX utilisation fell by 11% to $5.7 billion during the same period. On a year-on-year (y/y) basis, however, aggregate sectoral FX utilisation increased by a staggering 72%, reflecting broader market adjustments to fluctuating exchange rates and economic realities.
The decline in overall FX utilisation was largely driven by a significant reduction in invisible transactions, particularly in the financial services sector, which dropped by 32% q/q to $2.2 billion. Consequently, the financial services sector’s share of total FX usage dipped to 39%, compared to 51% in Q2 2024.
Meanwhile, the industrial sector maintained its position as the largest consumer of FX for imported raw materials, machinery, and equipment, accounting for approximately 53% of total FX utilized for merchandise imports. FX demand for merchandise imports rose modestly by 10% q/q to nearly $3.5 billion, increasing its contribution to total FX usage to 61%, up from 49%.
The trend of declining sectoral FX utilization, observed since Q1 2023, has been attributed to weakened FX demand following the significant devaluation of the Naira. Analysts at FBNQuest predict a modest improvement in FX utilization across sectors, citing increased FX liquidity and improved access to foreign currency as the CBN continues its efforts to streamline FX trading and enhance transparency in the market.
The rising FX demand for food imports raises concerns about Nigeria’s ability to manage its foreign exchange reserves effectively.
Increased dependency on imported food could further deplete reserves, reducing the CBN’s capacity to stabilize the Naira and fund critical sectors. With local agricultural production struggling to meet demand, food prices have continued to rise, exacerbating food insecurity and poverty. The World Bank has identified inflation and surging food prices as key drivers of poverty in Nigeria. Without structural reforms in agriculture and a shift toward diversifying export revenues, Nigeria risks deepening its economic and social vulnerabilities.
Experts emphasise the importance of reducing reliance on food imports by investing in local agricultural production. Addressing inefficiencies in the agricultural sector, managing FX reserves prudently, and creating a diversified export base could help Nigeria achieve a more sustainable economic trajectory. Over time, such measures would not only safeguard the nation’s reserves but also ensure greater food security and economic stability.
