Forex Transactions At Investors, Exporters’ Window Fall By 17%

Foreign exchange transactions at the Investors & Exporters window declined by 17.2 per cent last week, according to FMDQ Securities Exchange Limited.

The Central Bank of Nigeria had in April 2017 amid severe forex scarcity created the I&E window in a bid to boost liquidity in the forex market and ensure timely execution and settlement for eligible transactions.

The total value of transactions at the I&E window stood at $489.85m last week, representing a decrease of 17.02 percent ($100.49m) from $590.34m the previous week, according to FMDQ Exchange.

It said the total turnover in the forex spot and derivatives markets was $677.44m, representing a decrease of 24.93 percent ($225.01m) from $902.45m reported for the previous week.

The Exchange said the week-on-week decrease in turnover was jointly driven by the 17.02 percent ($100.49m) and 39.89 percent ($124.51m) decrease in the forex spot and forex derivatives turnover, respectively.

It said the decrease in forex derivatives turnover was jointly driven by the 7.39 per cent ($14.98m) and 100 per cent ($109.54m) decrease in forex forwards and forex futures turnover respectively.

It added that forex derivatives’ contribution to total forex market turnover dropped to 27.69 percent from the 34.58 percent recorded in the previous week.

The Nigerian forex market is segmented with multiple exchange rates, and the most important rate being the I&E window, according to Financial Derivatives Company Limited.

The FDC analysts, in a report last week, said, “No less than 55 per cent to 60 per cent of Nigerian forex transactions are traded at this window. The CBN and most exporters and investors use this window.

“It serves as not only a source of price discovery but also a barometer for measuring potential and actual CBN intervention in the market. Some of the exchange rate determinants are balance of payments, capital inflows and trade balance.”

The analysts, led by Mr Bismarck Rewane, said panic buying and profiteering would continue to influence the parallel market dynamics, while the I&E window would be driven by market forces of demand and supply.

“Forex rationing will continue to force manufacturers to use a blended rate and this will keep cost of raw materials high,” they added.

FMDQ Exchange said the Nigerian Autonomous Foreign Exchange Fixing rate averaged N411.16/$ last week, compared to $/N411.18 recorded in the previous week, representing an appreciation of the naira against the dollar by 0.01 per cent.

In the parallel market, the naira appreciated against the dollar by 0.23 per cent, at an average exchange rate of N510.80/$, compared to the N512.00/$ recorded in the previous week.