Connect with us

Forex

FX Transactions on I&E Window Hit $18.36bn, Rates Converge at N360

Published

on

A money changer holds Turkish lira banknotes next to U
  • FX Transactions on I&E Window Hit $18.36bn, Rates Converge at N360

Following increased portfolio flows into the country, cumulative transactions on the Central Bank of Nigeria’s (CBN) Investors’ and Exporters’ (I&E) foreign exchange window have risen to $18.36 billion.

The chief executive of Financial Derivatives Company Limited, Mr. Bismarck Rewane revealed this in a presentation at the monthly Lagos Business School’s breakfast session for November.

The surge in activities at the window has been attributed to offshore investor interest in treasury bills and the primary market auctions (PMA) by the CBN, with the resulting inflows leading to a convergence between the parallel market exchange rate and the Nigerian Autonomous Foreign Exchange Market (NAFEX) rate, also known as the I&E Forex window.

By the close of business on Friday, the dollar sold at 359 in Abuja and N360 in Lagos on the parallel market while on the NAFEX it sold at N360.57.

The convergence of the exchange rates, according to market sources, has seen a majority of bureau de change operators rejecting dollars offered by the CBN at a rate higher than the NAFEX rate.

With the sustained dollar inflow through the I&E window, which has also been buoyed by higher oil prices and improved oil production from Nigeria, market sources said they expect the naira to keep gaining against the dollar in the weeks ahead.

However, they expressed concern about the recent threat by the Niger Delta Avengers (NDA) to resume hostilities in the oil-rich Niger Delta region and expressed hope that the federal government would move promptly to engage the group, in order to sustain the stability in the forex market and the economy in general.

The central bank had introduced the I&E window last April including a raft of other measures to improve dollar liquidity in the forex market.

The CBN has since intervened actively to support the local currency while keeping domestic liquidity conditions tight.

Most activities now occur on the I&E window, with Fitch Ratings recently acknowledging that the rate on the I&E “should now be considered the relevant exchange rate”.

CBN Deputy Governor, Financial System Stability, Dr. Joseph Nnanna, recently described the I & E window as “a mighty success”, saying it has “performed beyond our expectations”.

“Within a few months of the window’s introduction, we have seen a volume of over $10 billion. It is a huge success and I believe other countries can copy that from us,” he said.

MSCI last week announced its decision to retain the MSCI Nigeria Indexes on its MSCI Frontier Markets Indexes, after an initial threat to delist Nigeria.

The performance of the I & E window was cited as the major reason for MSCI’s decision to retain Nigerian on the index,

According to MSCI, Nigeria would be removed from the review list for potential reclassification to “standalone status”.

The index provider had explained that: “MSCI will also no longer apply the special treatment for the MSCI Nigeria Indexes announced on April 29, 2016. More specifically, and as part of the upcoming November 2017 Semi-Annual Index Review, MSCI will implement all index review changes, including changes in the Number of Shares (NOS) and Foreign Inclusion Factors (FIF) that have been postponed since April 29, 2016.

“These changes will be made for securities classified in Nigeria in the MSCI Nigeria Indexes and in indexes which Nigeria is a component of. These include the MSCI Factor, Thematic, ESG and other relevant derived indexes. MSCI will also resume the regular implementation of corporate events effective immediately.

“As a reminder, the MSCI Nigeria Indexes were added to the review list for potential reclassification to Standalone status in September 2016 due to issues in the foreign exchange market leading to impairment in the ability of institutional investors to repatriate capital.”

Also, Rewane in the report noted that Brent oil price, for the first time in 28 months, broke the $60 per barrel barrier, which also was in favour of Nigeria.

Nigeria’s oil production also breached the OPEC cap at 1.86mpbd. The report estimated that oil revenue accruing to the federal government would hit $3.1 billion in October, noting that there was no force majeure or disruption to pipeline announced last month.

“In the I&E window, the naira was flat at N360/$ in October. Total forex sold in October was $1.09 billion ($1.2 billion in September). Average power output on grid in October reached 4000MW while extended rainfall into October increased the hydro output,” it added.

The report showed that the federal government had paid down N26 billion of the debt owed the power distribution companies and further revealed that not less than eight banks accessed the central bank’s standby facility window, confirming the tight naira liquidity situation in the market.

It stated that interbank interest rates swung between the extremes of 20-120 per cent per annum, while the states and federal government shared N558 billion in October from the Federation Account, down by 12.5 per cent compared to the funds shared in September.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

Continue Reading
Comments

Naira

Nigeria Hits Historic High as Currency in Circulation Surges to N3.69 Trillion

Published

on

naira

Nigeria’s currency in circulation surged to a historic high of N3.69 trillion, according to data released by the Central Bank of Nigeria (CBN).

This figure represents an increase of N43.07 billion or 1.18 percent from the total of N3.65 trillion reported in January 2024 and a 13.64 percent year-on-year rise from N3.25 trillion reported in February 2023.

Currency in circulation encompasses the physical cash, including paper notes and coins, actively used in transactions between consumers and businesses within the country.

The latest statistics indicate a considerable uptick in the availability of cash within the Nigerian economy.

The surge in currency supply comes amidst lingering concerns over a potential cash crunch following the monetary policy adjustments by the CBN, particularly the aggressive tightening stance of the Monetary Policy Committee (MPC).

Analysts attribute this spike to various factors, including the fear factor stemming from the cash crunch experienced in 2023 and lingering uncertainties surrounding the administration of physical currency.

Despite the surge in currency in circulation, Nigeria’s economic growth remains sluggish, with projections indicating growth rates of around 2.9 percent to 3.1 percent for 2024.

Also, inflation remains a significant concern, with the headline inflation rate climbing to 31.70 percent in February 2024 from 29.9 percent reported in January 2024, according to data from the National Bureau of Statistics (NBS).

The CBN’s proactive approach to monetary policy, including a historic increase in the monetary policy rate (MPR) to 24.75 percent, underscores the central bank’s commitment to addressing economic challenges and fostering stability amidst persistent pressures.

Continue Reading

Naira

Nigerian Naira Surges to N1,350 per Dollar in Parallel Market

Published

on

New Naira notes

The Nigerian Naira has appreciated to N1,350 per dollar in the parallel market, a significant gain from its previous rate of N1,430 per dollar just a day earlier.

Similarly, in the Nigerian Foreign Exchange Market (NAFEM), the naira strengthened to N1,382.95 per dollar, indicating an upward trend across key forex segments.

Data from FMDQ revealed that the indicative exchange rate for NAFEM fell to N1,382.95 per dollar from N1,408.04 per dollar on the previous day, representing a gain of N25.09 for the naira.

This surge in the naira’s value has widened the margin between the parallel market rate and NAFEM to N32.95 per dollar from N21.96 per dollar previously.

Analysts attribute this impressive surge to recent foreign exchange reforms implemented by the Central Bank of Nigeria (CBN).

These reforms, including the consolidation of exchange rate windows and liberalization of the FX market, have contributed to bolstering the naira’s strength against the dollar.

The CBN’s proactive measures aim to promote stability, transparency, and liquidity in the foreign exchange market, fostering confidence among investors and strengthening the national currency.

Continue Reading

Forex

CBN Governor Reveals $2.4 Billion Forex Forwards Under Investigation

Published

on

Naira Exchange Rates - Investors King

Governor Yemi Cardoso of the Central Bank of Nigeria (CBN) disclosed that law enforcement agencies are currently investigating foreign exchange forwards valued at $2.4 billion.

This announcement came in the wake of the Monetary Policy Committee (MPC) meeting held in Abuja on Tuesday, March 26.

Governor Cardoso shed light on the meticulous forensic audit conducted on these transactions, which uncovered numerous discrepancies, rendering them ineligible for payment.

The CBN, while settling certain tranches of FX backlog, encountered transactions riddled with issues concerning their authenticity.

To address these concerns, Deloitte management consultants were enlisted to conduct a comprehensive forensic analysis spanning several months.

The audit revealed a multitude of irregularities, including allocations disbursed without corresponding requests, lack of proper documentation, and instances of outright illegality.

Cardoso emphasized the gravity of the situation, stating, “We refused to validate them because, apart from the fact that documentation was not satisfactory in many cases, they were outright illegal.”

He underscored the commitment of law enforcement agencies to investigate these transactions thoroughly.

Despite concerns about potential backlogs among stakeholders, Cardoso assured that the market remains open and transparent for addressing any outstanding contractual obligations.

The CBN has diligently verified and settled recognized backlogs of forward transactions.

This revelation comes at a critical juncture as Nigeria grapples with economic challenges, including inflationary pressures.

The MPC’s decision to raise the benchmark interest rate to 24.75 percent reflects efforts to stabilize prices and restore the purchasing power of the average Nigerian.

As investigations unfold and regulatory scrutiny intensifies, the CBN’s commitment to transparency and financial integrity will be closely monitored by stakeholders across the nation.

Continue Reading
Advertisement




Advertisement
Advertisement
Advertisement

Trending