Foreign exchange transactions at the Investors’ & Exporters window declined by 24.56 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 $415.05m last week, down from $550.14m in the previous week, according to FMDQ Exchange.
It said the total turnover in the forex spot and derivatives markets dropped to $539.47m from the $692.60m reported for the previous week.
The exchange said the week-on-week increase in turnover was driven by the 24.56 per cent ($135.09m) and 12.66 per cent ($18.04m) decrease in the forex spot and forex derivatives turnover respectively.
It said the decrease in forex derivatives turnover was jointly driven by the 4.92 per cent and 100 per cent decrease in forex forwards and forex futures turnover respectively.
FMDQ Exchange said the average Nigerian Autonomous Foreign Exchange Fixing rate was N411.22/$, compared to N411.17/$ in the previous week, representing a depreciation of the naira against the dollar by 0.01 per cent.
It said in the parallel market, the naira depreciated against the dollar by 1.02 per cent at an average exchange rate of N515.80/$, compared to the N510.60/$ recorded 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 on Friday, 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.”
FDC analysts said the speculative activities at the parallel market would keep the exchange rate volatile in the next few weeks.
“However, upon receipt of the IMF’s SDR credit of $3.35bn expected on August 23, we expect gross external reserves to increase to about $34bn. This will provide more support for the CBN to support the currency and lead to a further convergence of the exchange rate around the I & E window,” they added.
– Punch