Forex: Turnover in I&E up by 46% to $8.2bn in Feb

As external reserves fall $1.68bn Manufacturing PMI drops to 58.3 index points Business confidence drops 26.6 index points

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THE volume of dollars traded (turnover) in the Investors and Exporters (I&E) window of the Nigerian foreign exchange market grew by 46 per cent, month-on-month, to $8.2 billion in February from $5.6 billion in January, 2020.

This represents the fourth consecutive monthly increase in the volume of dollars traded (turnover) in the window since August 2019.

Turnover rose by 75 percent, month-month (MoM) to $7 billion in August 2019, courtesy of increased inflow from foreign portfolio investors (FPIs). But it dropped by 44 percent to $4.4 billion in September from where it nosedived to $4.2 billion in October before rising by 26 percent to $5.3 billion in November while it remained stable at $5.3 billion in December last year.

The upward trend continued in January 2020 when turnover rose by seven percent to $5.6 billion, and up again by 31 percent to $7.34 billion in February.

Further analysis showed that the $7.34 billion turnover recorded in February represents 58 percent increase when compared with the average monthly turnover of $5.2 billion for the window in 2019 as total turnover for last year stood at $62.37 billion.

Financial Vanguard analysis of weekly turnover for February in the I&E window showed that $1.65 billion was traded in the  first week of February. Turnover rose by 18 percent to $1.95 billion in the second week and down by 20 percent to $1.57 billion in the third week.

The turnover picked up in the fourth week by 36 percent to $2.14 billion and up by 70 percent to $882.5 million in the fifth week of January.
However, the naira depreciated in the I&E window by N1.28 in February as the indicative exchange rate of the window rose to N365.25      per dollar on February 28 from N363.97 per dollar on February 28.

External reserves fall by $1.68bn

Meanwhile, the nation’s external reserves continued on its downward trend as it fell by $1.68 billion during the month.

Data from the Central Bank of Nigeria (CBN) showed that the reserves dropped to $36.329 billion on February 27 from $38.009 billion at the end of January. This represents the eighth monthly decline in the reserves since June 30, 2019.

Recall that the reserves, after falling persistently for seven months, from peak of $47.989 billion on July 5, 2018, to $42.296 billion on February 28, 2019, commenced steady upward trend which peaked at $45.175 billion on June 10, 2019. But, after four weeks fluctuation which ended on July 5 at $45.149 billion, the reserves commenced eight months downward trend which resulted to $8.82 billion or 8.4 percent decline as at February 27,2020.

The sharp decline in reserves was due to decline in dollar inflows from Foreign Portfolio Investors (FPIs), and increased dollar sales by the CBN in order to defend the naira.

Manufacturing PMI drops to 58.3 index points

In another development, the CBN said that the Manufacturing Purchasing Managers Index (PMI) dropped marginally to 58.3 index points    in February. This represents 0.9 index points decline when compared with the 59.2 index points recorded in January. It also represents the second monthly consecutive decline in the Manufacturing PMI since December.

The Non Manufacturing PMI followed a similarly trend as it fell to 58.6 index points in February, representing one index point decline, and the second monthly decline since December.

The declines were due to contraction in two of the 34 subsectors surveyed during the month. The two subsectors are primary metal and    printing and related support in the manufacturing sector and the professional, scientific, and technical services subsector in the non-manufacturing sector.

Discosing this in its PMI report for February, the CBN stated: “The Manufacturing PMI in the month of February stood at 58.3 index points, indicating expansion in the manufacturing sector for the thirty-fifth consecutive month. The index grew at a slower rate when compared to the index in January. Of the 14 surveyed subsectors, 12 reported growth (above 50% threshold) in the review month.

“The composite PMI for the nonmanufacturing sector stood at 58.6 points in February 2020, indicating expansion in Nonmanufacturing activities for the thirty-fourth consecutive month. The index however grew at a slower rate when compared to its level in January 2020. Of the 17 subsectors surveyed, 16 subsectors recorded growth (above the 50% threshold).”

Business confidence drops 26.6 index points

Meanwhile Business Confidence in the economy dipped to 26.6 index points in February. This represents 1.7 index points decline when compared with the 28.3 index points recorded in January.

Disclosing this in its February 2020 Business Expectations survey, the CBN said: “At 26.6 index points, the overall confidence index (CI) indicated respondents’ optimism on the overall macro economy in the month of February 2020. The business outlook for March 2020 showed greater confidence in the economy, with 58.1 index points (Fig.2).

“The optimism on the macro economy in the current month was driven by the opinion of respondents from services (14.7 points), industrial (8.3 points), wholesale/retail trade (2.6 points) and construction (1.0 points) sectors. Similarly, the major drivers of the optimism for next month were services (31.6 points), industrial (19.5 points), wholesale/retail trade (5.4 points) and construction (1.6 points) sectors.

“Further analysis showed that businesses that are neither import- nor export-oriented (17.8 points), import-oriented (4.2 points), both import- and export-oriented (4.1 points), and those that are export-related (0.7 point) drove the positive business outlook in February 202”.

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