Fx Transactions at Investors, Exporters Window Decline to $13.68bn
The foreign exchange (FX) transactions of the volume of US dollars traded at the Investors and Exporters (I&E) window in the first half of 2023 slumped to $13.685 billion, this translates to a more than 15% decline within 12 months. The exchange rate at the window has been under pressure from the weak supply side.
In the first half of 2023, the Central Bank of Nigeria (CBN) said the turnover of transactions at the I&E window amounted to US$13,685.17 million, compared with US$16,120.86 million in the corresponding period of 2022.
The demand for forex has continued to eclipse the amount of US dollar amount supplied, keeping the naira spot rate weak against the dominant US dollar and other primary currencies like the British pound Sterling, Euro and the like. Most analysts have noted that the apex bank intervention in the first half was weak, below the pre-pandemic era, causing additional pain for the local currency.
This led to a wide gap between the parallel market and official rates, a development that triggered a clamour for the devaluation of the local currency – right ahead of the decision of the monetary policy and government to bite the bullet. Even after the devaluation, the naira is still struggling due to weak inflows to the Nigerian economy despite higher global prices of oil.
The CBN said from the inception of the I&E window in June 2017 to mid-2023, the total turnover of transactions amounted to US$227,127.04 million. The monetary authority sustained its FX market intervention in the foreign exchange market in a bid to moderate demand pressures and ensure exchange rate stability.
In a bid to defend the naira by enhancing foreign exchange supply, the CBN said it sustained the implementation of ongoing policies of Naira4Dollar, Policy for Production and Productivity and agricultural funding schemes, among others in the first half of the year.
It also sustained the Race-To-US$200 billion FX programme (RT200) principally to facilitate non-oil production, value addition for exports and the repatriation of export proceeds for the period under review.
“The five components of the (RT 200) Programme were the Value-Adding Exports Facility, Non-Oil Commodities Expansion Facility, Non-Oil FX Rebate Scheme, Dedicated Non-Oil Export Terminal, and Bi-annual Non-Oil Export Summit.
“However, there was a cessation of the RT200 non-oil FX Rebate and the Naira4Dollar Remittance Schemes which took effect on June 30, 2023, following the operational changes to the foreign exchange market”, the CBN said in a report.
In the review period, spot transactions were lower compared with the corresponding period of 2022, while transactions in the forward market were marginally higher, according to first half of 2023 FX management review.
Consequently, a total of US$6,439.33 million was sold at the foreign exchange market comprising spot and forward sales in the sum of US$1,557.47 million or 24.19 per cent and US$4,881.86 million or 75.81 per cent, respectively, the report said.
The spot sales comprised US$612.41 million or 9.51 per cent of total foreign exchange sold at the inter-bank Secondary Market Intervention Sales (SMIS) window, US$455.31 million or 7.07 per cent for Small and Medium Enterprises (SMEs), US$441.75 million or 6.86 per cent for Invisibles, and US$48.00 million or 0.75 per cent at the I&E window.
Conversely, the CBN said it purchased a total of US$655.53 million in the market during the period. In an effort to ensure that the naira remains strong, the report shows that net sales by the CBN climbed to US$5,783.81 million in the first half of the year.
The apex bank also revealed that the sum of US$5,676.96 million matured at the forwards segment, while US$7,536.97 million was outstanding at the end of June 2023.
In the corresponding period of 2022, total sales amounted to US$9,229.26 million, comprising spot and forward sales of US$4,389.92 million or 47.57 per cent and US$4,839.35 million or 52.43 per cent, respectively.
The market witnessed a major development with the introduction of operational changes in the foreign exchange market, which led to the abolishment of foreign exchange segmentation and collapse of all segments into the Investors and Exporters (I&E) window.
As part of the foreign exchange market reforms, all eligible transactions under windows such as Secondary Market Intervention Sales, Small and Medium Enterprises and Invisibles (Personal Travel Allowance, Business Travel Allowance, medicals, subscriptions, and educational fees) were subsequently accessible at the I &E window.
The CBN said it also purchased US$1,325.43 million in the first half of the year, which translated to a net sale of US$7,903.83 million. It added that the sum of US$4,235.83 million matured at the forwards segment, while US$5,816.77 million was outstanding at the end of June 2022. Fx Transactions at Investors, Exporters Window Decline to $13.68bn
