The volume of dollars traded in the Investors and Exporters, I&E, window (a special Forex window created by the Central Bank of Nigeria) rose by 24.2 percent to $29.7 billion in the first half of the year (H1’18) from $23.9 billion traded in 2017.
Analysis of trading in the window also revealed that average daily transaction rose to $247.5 million in first half of 2018 (H1’18) from $170.9 million in 2017.
Indication that this trend will persist in the second half of the year, (H2’18) emerged last week, as the window recorded 8.5 percent increase in turnover.
A financial analysis revealed that volume of dollars traded rose to $863.83 million last week from $796.02 million the previous week.
This according to analysts at Afrinvest Limited, reflects investors’ preference for the I&E as platform for foreign exchange trade.
“Although the participation of the Central Bank of Nigeria, CBN, is estimated at 30 percent of the transactions in the window, the increased level of participation to some extent underscores the flexibility of the market as well as investors’ preference of the I&E as the platform for forex deals.
“This has largely removed the pressures from the parallel market rate which now sometimes, trade at a discount to the I&E rate”, they stated in the company’s half year economic review.
Notwithstanding the increased turnover, the Naira depreciated for the second consecutive week in the window last week.
Data from FMDQ OTC Securities Exchange showed that the indicative exchange rate rose further to 362.58 per dollar last week from N361.32 per dollar the previous week, translating to N1.26 depreciation of the Naira.
The Naira, however, appreciated by N2 in the parallel market as the market exchange rate dropped to N158 per dollar last week from N360per dollar the previous week.
In his outlook for the exchange rate in July and August, Bismarck Rewane, Managing Director/Chief Executive, Financial Derivatives Company, said the Naira will continue to be under pressure due to increased foreign exchange demand fuelled by implementation of the budget, dollar demand by people travelling for summer as well as capital outflows by foreign investors.
In his monthly economic review presented at the Lagos Business School, Rewane projected the Naira to depreciate to N375 per dollar in the parallel market, while the CBN will support the Naira aggressively by intensifying its intervention in the foreign exchange market.
The interbank money market will record net inflow of N1.9 trillion this month. Analysts at FSDH Merchant Bank made this projection last week, saying the market will record inflow of N2.02 trillion from maturing treasury bills (TBs), statutory allocation, as well as outflow of N828 billion through government securities and other statutory sources.
Meanwhile, cost of funds trended downward in the market last week, following upsurge in market liquidity due to absence of liquidity mop-up by the CBN, while inflow of N409.15 million through matured TBs offset outflow of N102.31 billion via primary market TBs issued by the CBN.
Consequently, average short term interest rate fell by 151 basis points (bpts) to 12.13 percent last week from 13.63 percent the previous week.
In another development, The Commercial Paper, CPs, segment of the money market received a boost in first half of 2018 (H1’18) with four firms raising N178 billion in quest for cheaper source of funds.
The firms are Sterling Bank which raised N54.3 billion, Access-N25.2 billion, FSDH Merchant- N18.6 billion, Nigerian Breweries-N15.8 billion, Coronation Merchant -N15 billion and Dangote Cement-N50 billion.
Analysts at Afrinvest Limited have projected that more firms will issue CPs in second half of 2018 (H2’18), in a bid to avoid high lending rate charged by banks.
“With probable moderation in the crowding out of treasury short term instruments, Corporates are likely to continue favouring Commercial Papers than approaching Banks for working capital funding at commercial rates.
“We remain optimistic that the expectation of more issuances will make the secondary market for Commercial Papers more active for traders to explore in H2’ 18″, they stated.