$25.65bn Forex transactions boost investors’ confidence -Investigation

The Investors & Exporters (I & E FX) FX window as at close of 2017 recorded a whopping total transactions’ turnover of $25.65 billion in just nine months of operations in 2017, The Daily Times can authoritatively report.

Due to low investors’ confidence and foreign exchange scarcity in 2017, the Central Bank of Nigeria (CBN) in a bid to ease the challenges faced by Nigerians in April last year created the I & E FX window.

In fact, data obtained by our correspondent from FMDQ OTC securities Exchange revealed that $0.61bn or N1865.66bn total turnover was traded in April; and increased by 114 per cent to $1.32bn or N403.92bn in May.

Total turnover on the I & E FX window in June and July were $1.63bn or N498.78bn and $bn1.86bn or N569.16bn, respectively.

Data from FMDQ OTC stated that total turnover gained momentum in August 2017, as newly created window reached $3bn per month.

According to the data, I & E FX window in August was estimated at $3.54bn or N1.08trn, while in September, total trade on the I & E FX window closed at $4.61bn or N1.4trn.

For October, it dropped to $4.30bn or N1.32trn.

In addition, the total turnover trade on the I & E FX window in November and December were $4.51bn or N1.38trn and $3.27bn or N1tn, respectively.

The I& E FX was created by the CBN to boost supply of foreign exchange into the nation’s economy, attract more investments and stabilise the foreign exchange market.

CBN introduced the special window for investors, exporters and end-users of foreign exchange on April 21, 2017, as part of its efforts to deepen the FX market and accommodate all the foreign exchange obligations.

Finance analysts said the absence of CBN’s weekly intervention also thrust trading on the specialised window though the foreign exchange market remains relatively stable.

Commenting on this development, the President, Association of Bureau De Change Operators of Nigeria (ABCON), Alhaji Aminu Gwadabe, said transaction’s turnover recorded at the I & E FX window in 2017 was an impressive reflection of the increasing level foreign investors/exporters confidence from a zero level of confidence.

According to him, the window enhances the realisation of investors request for transparency and best global practice in the Forex market.

“The turnover of over N4.4trn in the stock market last year is an indication of the performance of the investors’ window.

“The interventions in the various windows like the Small Medium Enterprises (SMEs) window, Diaspora inflows for BDCs, adequate liquidity supply for invisible and the critical roles of BDCs have in a long way led to the convergence and removal of spike in the market,” Gwadabe said.

He, therefore, urged the CBN to use the opportunity in enhancing a transparent allocation of the dollar supply in the market and further enhance the value of the naira.

He said: “The BDCs/commercial bank rates should be merged and converged urgently at the various market since we all operate in the same market.

“This is to avoid BDCs from going extinct as the parallel market is already posing a serious change as result of the different applicable selling exchange rates to the operators”.

Also commenting on the development, Associate Professor and Head, Banking & Finance department, Nasarawa State University, Prof. Uche Uwaleke, said: “There is no question that the Investors and Exporters window introduced by the CBN sometime in April 2017 was one of the best developments in the forex market last year.

“It came at a time the market was facing liquidity crisis and foreign investors’ confidence was waning.

“The window helped in no small measure in boosting liquidity and access to forex by creating an autonomous channel where the exchange rate is market determined.

“So, the huge turnover recorded since the introduction of the AFEX points to the strong confidence that investors now have in the Nigerian economy. This measure, supported by the CBN’s sustained intervention, has aided the near convergence of rates across all market segments.

“The first positive sign manifested almost immediately with the parallel market rate dropping from a peak of N520 to a dollar to less than N400 few days after. Capital importation has been on the rise on the back of this forex window; and the manufacturing sector has equally benefited going by the Purchasing Managers Index which has been above the 50 points threshold since May last year.

“In addition, the bullish nature of the stock market last year and its impressive performance owe largely to the introduction of the I & E window by the CBN. By and large, the effect on the economy has been salutary.”

Foreign exchange trading in the I & E Fx window was hovering around N360 against the Dollar in 2017.

Meanwhile, the CBN, also, in order to ease the difficulties encountered by Nigerians in obtaining funds for Foreign Exchange transactions, has commenced additional foreign exchange (FX) funding to commercial banks to meet customers’ Business Travel and personal, Medical, and School fees demands.

To this end, the apex bank addressed the needs of parents, guardians and sponsors who are seeking to make payments of school and educational fees for their children and wards.

The Acting Director, Corporate Communications, CBN, Mr. Isaac Okorafor, in a statement had said such retail transactions are expected to be settled at a rate not exceeding 20 per cent above the interbank market rate.

He explained that the CBN would meet the needs of parents, guardians and sponsors who are seeking to make payments of school and educational fees for their children and wards.

“Such payments must be made by commercial banks directly to the institution specified by the customer. The CBN would ensure that this process is as smooth as possible and that as many customers as possible get the foreign exchange they genuinely demand. This would also apply to customers seeking to make payments or purchase foreign exchange, for medical bills and paid directly to hospitals. The supply of FX to retail end-users (PTA, BTA, School fees, medical bills, etc) would be sustained by the CBN,” he added.