June 5, 2023

Forex: Turnover in I&E rises 78% to $2.5bn as Naira depreciates marginally

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By Elizabeth Adegbesan 

The volume of dollars traded (turnover) in the Investors and Exporters (I&E) window of the foreign exchange market rose by 78.5  per cent, month-on-month  (MoM) to $2.5 billion in May 2023 from $1.4 billion the previous month of April.

Vanguard’s findings from the monthly transactions in the window as published by FMDQ showed a consistent swings from upticks to declines month-on-month as turnover which stood at $2.22 billion in January fell by 22 per cent to  $1.7 billion in February and went up by 52.9 percent to $2.6 billion in March, before a significant 46 percent decline to $1.4billion in April, and now a massive uptick of 78.5 percent last month.

Further analysis of weekly transactions in May showed a similar pattern  of swings with turnover at  $326.65 million in the first week and rising  by 93.8  per cent to  $702.88 million in the second week.

In the third week, turnover declined by 14.6 percent to N599.67 and went up again by 7.1 percent to N642.47 million in the fourth week, and then down to N284.10 million in the last two days of May.

Meanwhile, the naira depreciated by N2.34 kobo to N464.67  per dollar in the I&E window on  May 31st  from N462.33 per dollar traded on May 2nd, 2023.

Similarly, the naira depreciated by N16 in the parallel market during the review period.

Vanguard findings from black market traders showed that the exchange rate for the market rose to N763 per US Dollar on May 31st from N747 per dollar on May 2nd, 2023.

Meanwhile the nation’s external reserves shed $1.9 billion between January and May. Figures obtained from the Central Bank of Nigeria (CBN) data on movement of external reserves during the weekend showed that the reserves, which stood at $36.99 billion as at the end of January 1, 2023, fell to $35.09 billion on May 31st, 2023.

Analysts in the financial sector of the economy projected a calm trading of the naira across all market segments in the first week of June as the CBN continues its weekly foreign exchange (FX) intervention.

In their Macroeconomic Update titled, “New Government policy direction rouse investors’ sentiments”, analysts at Cowry Asset Management Plc, said:” We expect the naira to trade in a relatively calm band across various market segment barring any market distortion and as the apex bank continues its weekly FX market intervention to defend the value of the naira.”

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