CBN Adjusts FX Rate for FPIs to N452 for 5-Month Futures
Slowly, the Central Bank of Nigeria (CBN) is moving toward unified foreign exchange rates, according to recent developments in currencies exchange windows which has seen subtle devaluations.
Amidst dollar scarcity and effort to stem the local currency from freefalling, CBN has been noted to have adjusted the exchange rate offered to foreign portfolio investors (FPIs) from N420 to N452 for 5-months futures.
According to Coronation Merchant Bank research, the spot price has been at N443 to a dollar since end-September 2021 in the retail secondary market intervention sales (SMIS) market. Recall MarketForces Africa reported the apex bank devalued exchange rate at interbank foreign exchange market from N380 to N430.
Explaining the effects on transactions, some analysts told MarketForces Africa that the new rates would affect how banks bid and offer dollars to customers. Many Nigerian banks recorded foreign exchange gains in the third quarter due to heavy intermediation play following Bureau de change ban.
After the CBN stopped week dollar support to the bureau de change operators in July, Naira has however worsened to N580 in the parallel market before it closed lower at around N570.
But, the local currency has not lost weight also in the Investors and Exporters foreign exchange window, crossing N420 to a dollar before it moderated to N415.
The gap in the foreign exchange spot rates has created arbitrage opportunities, according to analysts polled by MarketForces Africa. An investment expert, Kingsley Aigbe, told MarketForces Africa that the Central Bank is only postponing the inevitable amidst consensus that Naira is overvalued.
Last week, the Nigerian Autonomous Foreign Exchange Fixing (NAFEX) rate appreciated by 0.19% or N0.80 to N415.10 a dollar. In the forwards market, the rate appreciated at the 1-month contract by 0.14% to N416.07 a dollar and at the 3-month contract by 0.53% week on week to N422.22.
Based on our channel checks, Coronation Merchant Bank economist Chinwe Egwin noted that in the parallel market, the Naira closed at an average of N568, estimated that the gap between the NAFEX and parallel market rate is 37%.
Based on data from the FMDQ, NAFEX turnover showed a weekly decrease from $93.7 million to $99.1 million on Friday.
Over the past week, Coronation said in a research note that Investors and Exporters Foreign Exchange window recorded inflows of $426 million with the CBN accounting for 20.8%. Of the total dollar inflow, foreign portfolio investors (FPIs) accounted for 20.6%, non-bank corporates accounted for 21.5%, and others accounted for 37.2%.
Nigeria’s external reserves decreased by 0.2% or $102 million to close at $41.7 billion amidst improved global prices of oil and foreign currency borrowing.
“We maintain our view that the FGN’s $4 billion Eurobond issuance and the allocation from the International Monetary Fund’s (IMF) Special Drawing Right value at $3.4 billion bodes well for FX reserves”, Coronation said in its research note.
The firm now expects the NAFEX rate to trade range-bound between N412.00 – N420.00 to a dollar in the near term. In the retail secondary market intervention sales (SMIS) market, the spot price has been at the N443/$ level since the end of September 2021.
Coronation hinted that the CBN adjusted the exchange rate it offers to FPI clients from N420 to N452 for the 150-day or 5-month futures. Turning to the Chinese Yuan (CNY), according to data from the CBN the Naira appreciated by 0.2% week on week to N64.2/CNY.
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