FX: Investors/Exporters Window Records $1.3bn, Highest Ever Weekly Turnover

The Investors & Exporters (I&E) forex window, last week recorded the highest ever weekly turnover, of $1.33 billion, since it was launched in April this year by the Central Bank of Nigeria (CBN).
The last trading value represents an increase of 60.62 percent from $826.58 million, recorded the previous week.
The development can be attributed to a 193 percent volume of trade by the CBN, a member of the market and 37 percent trade by other member-clients, bringing the total value traded at the Window since inception to $12.14 billion, a report from FMDQ indicated.
The price of Brent crude oil rose to $58.44 per barrel, as at last week Thursday September 28, 2017 but dropped to US$55.71 per barrel as at yesterday, October 2, 2017. Crude oil accounts for more than 90 percent of Nigeria’s foreign exchange earnings.
CBN governor, Godwin Emefiele disclosed last week Tuesday, that external reserves position grew to US$32.9 billion at close of business on September 25, 2017.
Analysts last night hinged the record success of the I&E forex window on improving oil prices, input and output and other macro-economic indicators.
The Monetary Policy Committee (MPC) last week retained the Monetary Policy Rate (MPR) at 14 percent.
Ayodeji Ebo, managing director, Afrinvest Securities limited, said the development further reveals the acceptability and workability of the Investors & Exporters Window and the Nigerian Autonomous Foreign Exchange Fixing (NAFEX) rate.
According to Ebo, though the turnover of $1.33bn last week may be as a result of some one-off transactions, average volume has continued to increase week on week. The sustained accretion of the external reserves, as well as the spike in global oil prices (approaching $60/barrel) last week, may have further bolstered foreign investors’ confidence in the sustainability of Nigeria’s FX interventions. The fixed income market has enjoyed a fair share of Foreign Portfolio Investments (FPIs) due to the attractive yield, albeit moderating.
“Based on the aforementioned factors, we anticipate sustained improvement in the average turnover in the I&E window, as investors expect FX rates to converge towards the NAFEX rate in the short to medium term”, Ebo said in an emailed response.
The CBN continued its supply of US dollars in the FX market, offering $100.00million at a marginal rate of $/₦325.00 via a Single Secondary Market Intervention Sales (SMIS) – Wholesale session, held during the week-ended September 29, 2017. The apex bank reduced its intervention for Small and Medium-Scale Enterprises and for Retail Invisibles transactions from $80 million and $70 million the previous week, to $50 million and $45 million respectively.
Taiwo Oyedele, head of tax and regulatory services, PWC, looked at the suitability of the record success of the window and said it is policy driven and would be sustained if government policies are consistent.
“We need to see action on monetary policy, fiscal policy and what the government is doing in the ease of doing business for people to invest in the economy”, Oyedele said by phone.
Charles Robertson, global chief economist at Renaissance Capital, said in his emailed response to BusinessDay, that “Investors are attracted to the high interest rates in Nigeria, especially when the oil price is higher”.
Uche Uwaleke, Associate Professor and Head, Banking and Finance Department, Nasarawa State University, said the record increase in weekly turnover at the I&E window is not unconnected with rising international crude oil prices, adding that Nigeria’s exemption from an OPEC cut is a reflection of rebound seen in oil input and output.
Uwaleke told BusinessDay by phone that the MPC’s decision to hold the MPR at 14 percent, the retreating inflation rate, increase in manufacturing sector purchasing managers’ index, reduced tension in the country and favourable macroeconomic indicators, send a signal of stability in the economy to investors.
Last week’s market report showed that the CBN official rate fell by ₦0.10 to close at $/₦305.75, indicating a 0.03% appreciation, compared to $/₦305.85 at the end of the previous week-ended September 22, 2017.
In the Bureau de Change (BDC) market, the rates fell by ₦2.00 to close at $/₦364.00, indicating a 0.55% appreciation, compared to $/₦366.00 reported at the end of the previous week-ended September 22, 2017.
The naira depreciated at the I&E FX Window, where rates opened the week at $/₦360.31, losing ₦0.09 to close the week at ₦360.40, revealing a spread of $/₦3.60 between the I&E FX Window and the BDC market rates.
On the other hand, the spread between the BDC and the CBN official exchange rates fell by $/₦1.90 to $/₦58.25, representing a 3.16 percent decrease from the spread of $/₦60.15 recorded for the previous week-ended September 22, 2017.
In the OTC FX Futures market, $87.30 million was traded in 21 deals, compared to the previous week’s total of $292.56mm traded in 14 deals.
The FMDQ report revealed that trading activity in the Spot FX market between the banks and their clients stood at $1.6bn, with an average daily turnover of $317.58mm, representing a 10.91% decrease from the $1.8bn, with an average daily turnover of $356.46mm recorded the previous week.
Activity in the Spot FX market amongst banks for the same trading week, revealed a 37.79% increase, as a total turnover of $215.07million, with an average daily turnover of $43.01mm was recorded against the $156.09 million, with an average daily turnover of $31.22mm reported the previous week.(BusinessDay)

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