Freetown, SIERRA LEONE – In the opening quarter of 2023, Commercial Banks engaged in foreign exchange trading, with transactions totalling US$370.21 million. This figure reveals a 7.8 per cent decline compared to the corresponding quarter in 2022 and a 6.6 per cent decrease from the preceding quarter, Q4-2022.
The foreign exchange market, a critical economic indicator, encompasses both the official market, inclusive of banks and FX-bureaus, and the parallel market, which also counts some official institutions among its participants, notably the FX-bureaus.
While the Central Bank reports that there is no available data on parallel market turnover, anecdotal evidence suggests its depth and liquidity surpass that of the official market.
During this period, Commercial Banks were active purchasers and sellers of foreign exchange, acquiring US$211 million and selling US$160 million worth of foreign currency. To put this in perspective, this activity surpasses the average quarterly remittance inflow, which stands at approximately US$125 million.
Commercial Banks typically source foreign currency from various sectors, including the mining industry, the service sector, FX-bureaus, and international organizations, predominantly non-governmental organizations (NGOs).
Remittances, a significant source of foreign exchange, are usually procured either directly from remittance companies or indirectly via FX-bureaus. Meanwhile, Commercial Banks predominantly sell foreign currency to importers, including those in the rice and oil marketing industries, as well as the service sector.
Further insights from the Central Bank reveal that deposits into customer FX accounts reached an impressive US$576.69 million, while withdrawals from these accounts amounted to US$346.53 million during the first quarter of 2023. Consequently, there was a notable net increase in FX balances, totalling approximately US$230 million.
In terms of growth, both receipts and payments witnessed substantial increases, surging by 37.3 per cent and 30.9 per cent, respectively, in comparison to the same period in 2022. ZIJ/18/9/2023