•Declines 33.8% M-o-M, records significant depreciation

By Elizabeth Adegbesan

The volume of dollars traded (turnover) in the Investors and Exporters (I&E) window of the Nigerian Foreign Exchange Market rose sharply by 63.8 per cent, year-on-year (YoY) to $2.13 billion in February 2022 from $1.3 billion in February 2021.

However, on a monthly basis, turnover fell by 33.8 per cent to $2.13 billion in February from $3.22 billion in January 2022.

Vanguard findings from the daily transactions data in the window as recorded by FMDQ Exchange show fluctuations in volume of trade week-on-week in throughout February.

In the first week of the month $497.78 million was traded while the volume rose 13.5 per cent to $565 million in the second week and down by 12.6 per cent to $493.7 million in the third week.

The turnover went up in the fourth week by 15.6 per cent to $571.09 million.
The local currency recorded a significant depreciation M-o-M, losing N1.34 in February as the indicative exchange rate for the window rose to N416.67 per dollar yesterday from N415.33 on January 31, 2022.

READ ALSO: Forex: Turnover in I & E rises 152% to $2.16bn in January

Analysts at Cowry Asset Management Limited, in their weekly investment outlook for the economy and foreign exchange market, expressed concern that the country would not benefit from any rise in crude oil prices amidst the Russian invasion of Ukraine as this would increase pressure on external reserves and exchange rate.

They said: “The rise in the Narrow money without a faster rise in GDP may result in higher inflation in 2022. In 2021, the velocity of Narrow money moderated to 10.16 times from 11.49 times in the preceding year even though Narrow Money rose by 14 per cent over the period. Hence, the productivity of the country needs a lot of improvement going forward.

“Meanwhile, in the wake of the Russian invasion of Ukraine, we are concerned that Nigeria would not optimally benefit from any ensuing rise in crude oil prices due to its suboptimal crude oil production. This would increase pressure on the external reserves as well as exchange rates as oil dollar revenues, its primary foreign currency earner, would struggle to meet the higher cost of imported refined products in addition to other imports.”

On forex they stated: “Naira appreciates at I&E FX Window but slides at the parallel market. In the new week, we expect the Naira to depreciate against the dollar, despite the high crude oil prices at the international market, amid declining external reserves.”

Vanguard News Nigeria