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 * Wednesday, 11th January, 2023




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AMIDST INVESTORS & EXPORTERS DEMAND, FX TURNOVER ON FMDQ REACHED N56.52TRN IN
2022

Business | 9 hours ago

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Kayode Tokede

Amid investors and exporters demand, foreign exchange sales increased to N56.52
trillion in 11 months of 2022, representing an increase of 10.1 per cent over
N51.34 trillion recorded in 11 months of 2021, a report by FMDQ Exchange has
revealed.

The I&E foreign exchange window is the market trading segment for investors,
exporters and end-users that allows for FX trades to be made at exchange rates
determined based on prevailing market circumstances.



The FX market in 2022 witnessed scarcity and increased intervention by Central
Bank of Nigeria (CBN), leading to a dwindling decline in foreign reserves.

Findings by THISDAY revealed that investors & exporters foreign exchange
turnover in 2021 stood at N58.18 trillion as against N68.22 trillionin 2020.

Analysts have expressed that the intense supply of FX at the investors and
exporters window has impacted economic growth, stressing the role CBN has
played.

The governor of the Central Bank of Nigeria (CBN), Godwin Emefiele in 2022 said
the investors and exporters window attracted over $50 billion in investments to
the country within three years.



According to him, “The CBN introduced the Investors and Exporters (I&E) Forex
window to enable investors and exporters to purchase and sell forex at the
prevailing market rate. This has attracted over $50 billion in investment to the
country within three years.”

Commenting on investors & exporters foreign hike in 11 months of 2022, the vice
president, Highcap Securities Limited, Mr. David Adnori attributed the growth
recorded in the total foreign exchange turnover in the 11 months to increasing
business activities.

He said that the slow growth in business activities in the first five months of
2022 affected foreign exchange turnover traded, attributing it to uncertainty in
the global economy amid hike in inflation rate.

He said: “The restrictions had affected investors and exporters’ demand for FX
in the first five months of 2022. The war between Russia/Ukraine affected
capital inflow into the country and led to volatility in the foreign exchange
market.



“However, with the ease of movement in 2022, investors and exporters surge for
FX from the FMDQ market increased and it reflected in the amounts.”

The Chief operating officer of InvestData Consulting Limited, Mr. Ambrose
Omordion, also said the growth to increasing demand for FX, maintaining that
global economy was expected to have expanded in 2022 but might be slowed down
due to the crisis between Ukraine and Russia.

According Omordion, “the Nigeria economy has witnessed more business activities
in the 11 months of 2022 and demand for FX has increased significantly.”

With the growth in turnover FX trade by investors & exporters, the CBN on its
official website revealed that Naira against the dollar closed in 11 months of
2022 at N443.584/ Dollar from N306.5/ Dollar it opened in the year under review.



 Analysts at Investment One Research in their 2022 review and 2023
macro-economic and financial markets outlook, titled; “Unboxing the new
realities,” explained that in 2022, the higher oil price but low reserves
conundrum continued to torment the local currency.

According to them, “As such, the pressure on the exchange rate intensified
buoyed by the low accretion to reserves. Despite Brent trading at multi-year
high, the impact on foreign reserves was limited given the country’s low
production and elevated subsidy payments. Resultantly, FX reserves declined by
8.93per cent to close at $36.96 billion as at 2022.

“In a bid to reduce the pressure on the Naira, the CBN introduced the RT200
non-oil export proceed repatriation rebate scheme to enhance FX inflow,
diversify the sources of foreign inflow, increase the contribution of non-oil
exports, ensure stability and sustainability of FX inflows, and support oriented
companies to expand their export operations and capabilities.

“The rebate scheme rewarded exporters with the payment of N65 for every $1
repatriated and sold at the I& EFX Window to Authorized Dealer Banks (ADBs) for
other third-party use, and N35 for every $1 repatriated and sold into I & EFX
for eligible transactions only.”

The report disclosed further that, “Consequently, the incentive was positive at
the I & EFX window as inflows from exporters rose to $4.93 billion as at FY
2022, 117.18per cent higher than the $2.27 billion recorded in FY 2021.

“On the flip side, CBN’s participation and FPI inflows via the IEFX window
recorded lower activities as it crashed by 50.58per cent and 53.45per cent to
$2.08 billion and $1.28 billion, respectively.”

The report stated that at the I& EFX window, the naira continued to lose value
against the Dollar, as it depreciated by 3.79 per cent to close at N451.50/$
against the backdrop of declining reserves, low foreign portfolio inflows and
diaspora remittances.



“In the same vein, the tight liquidity conditions driven by little or no supply
with expanding demand, political activities and speculative demand drove the
black-market rate to new lows. We highlight that the pressure on the Naira at
the black market worsened as the CBN’s decision to redesign the Naira notes in a
short timeframe triggered intense speculation, and a switch to the greenback by
some currency hoarders.

“As such, the scarcity in the FX market intensified, with the Naira plummeting
to N800/$ during the year. As a store of value, the market seems to have lost
confidence in the currency thus, exacerbating the rotation from local assets to
foreign assets.

“Overall, Naira depreciated at the black market by 42.31per cent to close at
N750.00/$. Resultantly, the spread between the official and black market widened
and oscillated within the range of N300.c,” the report said.

They forecasted that the local currency will weaken further in 2023.

“While the nation’s FX reserves may proffer support for the currency, we
highlight that the CBN will continue to allow the Naira to weaken to c. N480/$ –
N490.00/$ at the I& EFX window during the year to aid marginal improvement in
balance of payment. As such, we opine that we might not see a devaluation in the
Naira beyond that level,” the report added.






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