- Transactions on FX Investor Window Hit $2.2bn
The Central Bank of Nigeria on Thursday said its new currency window for investors had handled $2.2bn of trade in six weeks.
The CBN also said it accounted for almost 30 per cent of the $2.2bn transactions, adding that this was meant to keep the window operating.
The CBN had about six weeks ago created the Investors & Exporters FX Window to attract foreign investors and at same time maintain a strong currency to ward off inflation.
Analysts and experts have lauded the initiative as a right step in the right direction.
However, some experts including a former Governor of the CBN, Prof. Charles Soludo, said although the initiative among others taken by the regulator in recent times had moved the forex market forward by 10 steps, there was a need to take about 90 steps to get the economy to where it ought to be.
Commenting on volume of activities on the I&E FX window, the Acting Director, Corporate Communications, Mr. Isaac Okorafor, said the CBN would sustains its intervention to support the naira.
He said the central bank was comfortable with the external reserves level of $30.3bn. Analysts estimate the bank has spent more than $5bn defending the naira this year.
“Average trading on investors’ window is now $2.2bn in the first six weeks of its introduction with our participation restricted to less than 30 per cent,” Okorafor told Reuters.
“This showed the level of confidence in the system,” he added.
Before the investors’ window was introduced in April, the central bank was the main supplier of hard currency on the interbank forex market, after foreign investors fled naira assets in the wake of an oil price slump in 2014.
The regulator has allowed investors to trade the naira at rates set freely between buyers and sellers, hoping to increase the amount of dollars available in Nigeria – but effectively introducing yet another exchange rate to the five already in operation.
The CBN has an exchange rate for Muslim pilgrims going to Saudi Arabia, a retail rate set by licensed Bureau De Change operators, and a rate for foreign travel and school fees, in addition to the official and black market rates.
The stock market has reacted positively to the introduction of the investor window, rising 34 per cent in six weeks with volumes more than doubling.
The rally also partly follows MSCI’s recent move to boost Nigeria’s weighting on its frontier index, according to analysts.
“When we started intervening in the market, the question was sustainability but we will ensure the process is sustained,” Okorafor said in Lagos.
The central bank last year removed a temporary peg to float the naira, but to protect its precariously low foreign reserves it introduced the convoluted exchange rate system that sees different buyers paying various rates for dollars.
It has said the move is needed to eliminate frivolous demand for foreign currency.
The naira was quoted at 372.70 on the investors’ window on Thursday. It traded at 365 on the black market and was stuck at around 305.25 to the dollar on the official window.
“Today we are gradually achieving convergence between the investor window and invisible window (FX rate for retail users),” Okorafor said