…as turnover in I&E window soars156% to $4.31bn external reserves inches up

By Elizabeth Amihore

The Central Bank of Nigeria, CBN, Standing Lending Facility (SLF) has stepped up scour for deposit banks in Nigeria with increase in month-on-month (MoM) lending.

The banks’ recourse to the apex lending window rose by 124 percent in August amidst challenging liquidity pressures.

Figures from the CBN financial data for August showed that banks borrowed  N1.69 trillion from the apex bank’s SLF in August compared to N755.64 billion borrowed in July.
The banks’ borrowing had increased in July by 107 percent from N365.06 billion in June.
However, the banks’ deposits in the CBN Standing Deposit Facility, SDF, declined MoM by 11 percent to N698.27 billion in August from N783.66 billion in July.
This is coming after recording a 25 per cent rise from N625.66 billion deposit in June.
The SLF and SDF figures indicate that some banks are borrowing more and depositing less with the apex bank.

Forex: Turnover in I&E rise 156% 

Meanwhile, the apex bank may have increased its intervention in the foreign exchange market as it also spurred independent inflows of foreign currencies into the market. Consequently, the volume of dollars traded (turnover) in the Investors and Exporters (I&E) window of the foreign exchange market rose sharply by 156.5  per cent, month-on-month (MoM) to $4.31 billion in August 2023 from $1.68 billion in July, the highest growth and turnover this year.
Vanguard MoneyDigest findings from the weekly transactions in the window as published by FMDQ showed that turnover stood at $366.96 million in the first week of August and rose by 2.4 per

cent to $375.61 million in the second week. The rising trend continued in the third week as turnover increased by 57.5 percent to $591.83 million and declined by 29 percent to $417.89 million in the
fourth week.

In the fifth week of August, turnover stood at $367.47 million. Naira depreciates
The naira depreciated in the parallel market and Investors and Exporters (I&E) window during the review period.
Data from FMDQ Exchange showed that the naira depreciated by N2.77 kobo to N762.71 per dollar in the I&E window at the end of August 2023 from N756.94 per dollar traded on July 30th, 2023.
Similarly, the naira depreciated by N50 in the parallel market.
Vanguard MoneyDigest findings showed that the exchange rate in the parallel market rose to N920 per dollar at the end of August from N870 per dollar on July 30th, 2023.
Consequently, the parallel market premium, which is the gap between the official and parallel market exchange rates, widened to N157.29 per dollar on August 31st 2023 from N113.06 per
dollar on July 30th. However, the nation’s foreign reserve grew by 0.03 percent to $33.95 billion on

August 31st from $33.94 billion on August 1st.
Recall that the CBN and Federal Government in the first few months of
the new administration introduced several policies including the managed float of the naira through a willing-buyer-willing-seller trading model, as well as consolidation of the market into a
single window to eliminate corruption. However, analysts in the financial sector of the economy projected a decline in economic growth due to the short-term impact of policy changes on aggregate
demand.

In their Gross Domestic Product outlook for Third Quarter 2023, analysts at Financial Derivative Company, FDC, said:”We expect real GDP growth to decline further to 2.15 percent in Q3’23 due to the short-term impact of policy changes on aggregate demand. 
“The deceleration in GDP growth, combined with the surge in inflation to 24.08 percent in July, will be major considerations at the monetary policy committee meeting in September. 

“Notwithstanding the slowdown in GDP growth, we expect the committee to maintain its aggressive monetary policy stance.”
On their part, analysts at Cowry Asset Management Plc, In their note on GDP Q2’23 said: “On the other hand, we maintain that the soaring inflation, particularly in view of commodity price shocks and imported food inflation due to the Russian -Ukraine conflict, fuel subsidy removal, floating of the naira by the CBN and tumbling daily oil production volumes may pose a downside risk to growth this year. “Thus,
Cowry Research trims it 2023 GDP forecast to 3 percent from the earlier projection of 3.74 percent.”