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WDAS: Autonomous inflow trigger 46% decline in forex demand

Babajide Komolafe
Demand for foreign  exchange at the official foreign exchange market fell sharply by 46 per cent in September following increased inflow of foreign exchange from autonomous sources.

Analysis of results of transactions at the Wholesale Dutch Auction System (WDAS) sessions conducted by the Central Bank of Nigeria (CBN) indicated that foreign exchange demand fell to $2.015 billion from $3.717 billion in August. Amount sold by the apex bank also fell by 59 per cent to $1.774 billion from $3.026 billion.

The decline in demand bouyed the fortunes of the Naira as it appreciated   by 405 kobo between August and September. From N151.37 per dollar at the end of August the official exchange rate dropped to N147.32 per dollar at the end of September.

Foreign  exchange   dealers  attributed the decline in foreign exchange demand to increased inflow of foreign exchange from autonomous sources. A Senior foreign exchange dealer told Vanguard, “ There have been increased supply for autonomous sources.

For example last week there was supply from NIMASA and LNG and this has helped reduced demand pressure in the market as reflected in the interbank foreign exchange rate which fell last week. If the trend should continue and we expect it to do so we might have a situation where the interbank foreign exchange rate fall below the official exchange rate. If this happen then demand would drop to zero at the official market”

A bureaux de change operator also told Vanguard, “There is no demand in the market. Everything is just at a stand still and make matters worse the rates are falling”

At the parallel market the exchange rate fell to N155.5 per dollar from N157 indicating 150 kobo appreciation.
Meanwhile cost of funds fell at the ineterbank money market last week as the market remained liquid through the week. Interest rate on Overnight lending dropped to eight per cent from 12 per cent while interest rate on Colaterised lending (open buy back) remained stable at eight per cent through the week.


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