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The Gains of Investors’ and Exporters’ (I&E) FX Window

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The Gains of Investors’ and Exporters’ (I&E) FX Window

By FSDH Research

The implementation of the Investors’ and Exporters’ Foreign Exchange (FX) Window has increased the supply of foreign exchange into the Nigerian economy.

In addition, it has attracted more investments into Nigeria. Consequently, we observed relative stability in the foreign exchange market. Companies and individuals are now able to access more foreign exchange in the market than before to carry out eligible transactions and economic activities are gradually picking up.

The Central Bank of Nigeria (CBN) introduced the special window for investors, exporters and end-users of FX on April 21, 2017 as part of its efforts to deepen the FX market and accommodate all the FX obligations.

According to the CBN, the objective of the window is to increase liquidity in the FX market and ensure timely execution and settlement of eligible transactions. The eligible transactions in the window are: 1) Invisible transactions such as loan repayment, capital repatriation, management services fees, consultancy fees, software subscription, technology transfer agreements, personal home remittances and any other eligible invisible transactions. 2) Bills for Collection 3) Any other trade-related obligations (at the instance of the customers).

The CBN stipulates that the supply of foreign currency to the window shall be through portfolio investors, exporters, authorized dealers and other parties with foreign currency to exchange to Naira. The CBN is also a market participant in the window to promote liquidity and professional market conducts.

As at August 11, 2017 the total turnover in the I&E FX window stood at US$7.62bn. Our monthly analysis of the turnover shows that it increased consistently from US$0.61bn in April 2017 to US$2.17bn in July 2017.

At US$1.7bn as of August 11, 2017, there are indications that the turnover in August 2017 will be higher than the July 2017 turnover. The introduction of the window has encouraged exporters to bring back their export proceeds to the country and through the official sources, thus increasing the stock of foreign exchange in the country.

Another important gain of the window is that it has attracted more foreign capital into Nigeria for various forms of investment. Our analysis of the capital importation data from the CBN between January and May, 2017 shows that there was a growth in capital importation in 2017 compared with 2016.

The total capital importation in the five months ended May 2017 stood at US$2.09bn representing a growth of 82.78% compared with the US$1.42bn recorded in the corresponding period of 2016. Other Investments (OI) – Loans attracted the highest capital of US$886mn between January and May in 2017, followed by Foreign Direct Investment (FDI) – Equity of US$436mn and closely followed by

Foreign Portfolio Investment (FPI) – Equity of US$413mn.

We also observed that the capital imported into Nigeria increased significantly from US$244mn in March to US$563mn in April 2017 following the commencement of the programme. The increased supply of FX led to an appreciation in the value of the Naira.

In the parallel market, the value of the Naira appreciated by 7.87% from N396/US$ on April 25, 2017 to N367.50/US$ as at August 11, 2017. At the I&E window, the Naira gained 2.82% from N374.96/US$ on April 25, 2017 to N364.78/US$ as at August 11, 2017. In the inter-bank market it also gained 0.1% from N305.9/US$ on April 25, 2017 to N305.65/US$ on August 11, 2017. The 30-day moving average external reserves also appreciated by 1.95% during the period while the equity market appreciated by 40.66% during the same period.

The manufacturing and non-manufacturing purchasing managers’ indices appreciated by 5.9% and 9.9% respectively during the period. All these leading indicators show the improved performance of the Nigerian economy during the period.

Although we commend the initiative and note the gains the Nigerian economy recorded since its implementation, we believe that the gains could be short-lived in the absence of complementary measures that will improve the competitiveness of the Nigerian economy.

There is the need for concerted efforts to improve physical and human infrastructure in order to increase local production to meet local consumption and boost exports to generate diversified foreign exchange earnings.

 

Dipo Olowookere is a journalist based in Nigeria that has passion for reporting business news stories. At his leisure time, he watches football and supports 3SC of Ibadan. Mr Olowookere can be reached via dipo.olowookere@businesspost.ng

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Economy

Nigerian Exchange Rises 0.23% as Investors Mop up Bank Stocks

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Nigerian Exchange 1

By Dipo Olowookere

The Nigerian Exchange (NGX) Limited extended its gains on Friday with a 0.23 per cent growth on the back of a sustained interest in bank stocks.

Business Post observed that investors mopped up equities of tier-one lenders yesterday and this buying pressure further lifted the All-Share Index (ASI) of the exchange by 88.15 points to 38,962.28 points from the previous day’s 38,874.13 and pushed the market capitalisation higher by N46 billion to N20.300 trillion from N20.254 trillion.

The market breadth was positive during the session as there were 25 price gainers and 11 price losers, indicating a positive investor sentiment.

Pharma Deko topped the gainers’ chart after its equity price went up by 9.74 per cent to N2.14. Sovereign Trust Insurance grew by 8.70 per cent to 25 kobo, Okomu Oil rose by 5.77 per cent to N110.00, Eterna appreciated by 4.95 per cent to N7.00, while Champion Breweries moved up by 4.71 per cent to N2.00.

On the reverse side, SCOA Nigeria topped the log with a price decline of 9.38 per cent to settle at 87 kobo. Presco went down by 8.18 per cent to N73.00, Regency Alliance fell by 6.38 per cent to 44 kobo, Total Energies depreciated by 3.61 per cent to N192.00, while Sterling Bank depleted by 1.34 per cent to N1.47.

A look at the performance of the five key sectors of the market showed that the banking space closed 1.86 per cent higher, the insurance sector rose by 0.27 per cent, the consumer goods counter appreciated by 0.06 per cent, while the energy index grew by 0.04 per cent, with the industrial goods sector closing flat.

The most traded stock on Friday was FBN Holdings as investors exchanged 481.5 million units valued at N3.6 billion.

Ecobank traded 16.6 million units worth N87.8 million, Zenith Bank transacted 12.0 million units valued at N279.0 million, Access Bank exchanged 11.6 million units worth N100.9 million, while Transcorp sold 9.4 million units for N8.7 million.

At the close of business, a total of 633.5 million shares worth N6.5 billion were traded in 3,228 deals as against the 125.8 million shares worth N1.3 billion transacted in 2,990 deals on Thursday, indicating a 403.61 per cent rise in the trading volume, a 409.36 per cent growth in the trading value and a 7.96 per cent jump in the number of deals.

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Economy

FX Demand Pressure Crashes Naira by N1.22 at I&E

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Nigerian Naira

By Adedapo Adesanya

The Naira came under immense pressure on Friday against the United States Dollar at the Investors and Exporters (I&E) segment of the foreign exchange (FX) market as more customers approach the banks for their forex needs.

The Central Bank of Nigeria (CBN) had informed FX users to stop patronising traders at the unregulated segment of the market and use the I&E window for their forex transactions.

But it seems the traders at the official window are battling with FX supply as the demand pressure is taking its toll on the local currency, according to its performance yesterday.

Business Post reports that the domestic currency depreciated against the greenback on Friday by N1.22 or 0.30 per cent to close at N414.90/$1 compared with N413.68/$1 it was traded on Thursday.

It was observed that during the session, the value of trades increased by 10.1 per cent or $17.71 million to $193.59 million from the previous day’s $175.86 million.

At the interbank segment of the market, the value of the indigenous currency also depreciated by 3 kobo to settle at N410.70/$1 in contrast to N410.67/$1 it traded at the preceding session.

As for the digital currency market, there was a downward movement in eight of the 10 tokens monitored by this newspaper yesterday as only the duo of Cardano (ADA) and the United States Dollar Tether (USDT) appreciated at the market by 1.2 per cent and 0.1 per cent respectively to settle at N1,374.04 and N576.01 apiece.

On the other hand, Ethereum (ETH) went down by 7.6 per cent to sell at N1,713,900.99, Litecoin (LTC) dipped by 6.6 per cent to trade at N86,848.72, while Dash (DASH) fell by 5.8 per cent to N97,992.14.

Also, Tron (TRX) declined by 3.9 per cent to finish at N53.39, Ripple (XRP) lost 3 per cent to trade at N559.99 Dogecoin (DOGE) depreciated by 2.4 per cent to trade N125.90, while Bitcoin (BTC) reduced by 1.9 per cent to close at N24,809,058.00.

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Economy

Brent Climbs Above $78 as Supply Tightens

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Brent Price

By Adedapo Adesanya

Brent crude oil rose above $78 a barrel on Friday, precisely to $78.09 per barrel after it appreciated by 1.09 per cent or 84 cents as global output disruptions forced energy companies to pull out large amounts of crude inventories.

Also during the session, the price of the United States West Texas Intermediate (WTI) crude futures improved by 0.63 per cent or 93 cents to finish at $73.98 per barrel.

The Brent posted its highest value since October 2018, while the WTI since July 2021.

It was also the third week of gains for Brent and the fifth for WTI mostly due to US Gulf Coast output disruptions from Hurricane Ida in late August.

The market has been bullish since news of US crude stocks dropped to their lowest since October 2018 and the broader market received more clarity about the US Federal Reserve next policy moves.

After the US Fed signalled that it could begin tapering asset purchases as soon as November and potentially start raising interest rates as soon as next year, oil market participants turned their focus to global oil inventories, especially those in the United States.

The aftermath of Hurricane Ida is still curtailing oil production in the world’s largest producer, with 16 per cent of crude oil production in the Gulf of Mexico still offline, according to the latest data from the country’s Bureau of Safety and Environmental Enforcement (BSEE).

The market also gained as US oil refiners were hunting to replace Gulf crude, turning to Iraqi and Canadian oil while Asian buyers have been pursuing Middle Eastern and Russian grades, analysts and traders said.

Positives from one of the world’s biggest exporters, India helped the market as crude imports rose to a three-month peak in August, rebounding from July’s near one-year low.

And the fact that some members of the Organisation of the Petroleum Exporting Countries and allies (OPEC+) have struggled to raise output due to under-investment or maintenance delays during the pandemic also added to the bullish sentiment.

Iran, which wants to export more oil, said it will return to talks on resuming compliance with the 2015 Iran nuclear deal very soon, but gave no specific date. The return of Iranian oil may be damaging to the market since it is exempted from OPEC cuts.

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