Transactions on CBN’s I & E Window Hit $171bn


By Obinna Chima

The cumulative transactions on the Investors and Exporters’ (I&E) foreign exchange window of the Central Bank of Nigeria (CBN) have risen to $171.45 billion since the bank created the market three years ago.

Data obtained from the CBN by THISDAY also revealed that total forex inflows garnered through the forex window since it was established on April 27, 2017, stood at $93.85 billion as of last Friday.

However, as Nigeria’s economy faces a double whammy of the sharp decline in crude oil price and the economic damage caused by the COVID 19, inflows through the I & E window is expected to be impacted negatively.

The CBN had introduced the Nigerian Autonomous Foreign Exchange Fixing Mechanism (NAFEX), commonly known as the I&E window as well as a raft of other measures to improve dollar liquidity in 2017, when the country faced a severe forex crisis.

The banking sector regulator had explained that the purpose of the window was to boost liquidity in the forex market and ensure timely execution and settlement for eligible transactions. The surge in inflows through the window then was attributed to offshore investors’ interest in Nigeria’s fixed-income securities.

The naira exchange rate against the dollar closed at N384.21 to a dollar on Friday.

The apex bank had listed eligible transactions under the new window to include invisible transactions such as loan repayments, loan interest payments, dividends/income remittances, capital repatriation, and management service and consultancy fees.

Also, on the eligible list were software subscription fees, technology transfer agreements, personal home remittances and any such other eligible transactions, including ‘miscellaneous payments’ as detailed under Memorandum 15 of the CBN Foreign Exchange Manual.

The CBN is a market participant at the window to promote liquidity and professional market conduct.

Nigeria’s external reserves stood at $33.626 billion as of April 22, according to figures obtained from the central bank’s website.

CBN Governor, Mr. Godwin Emefiele, had explained that the window was introduced in 2017 as a strategy to further liberalise the market.

“It was designed to increase transparency in the market because the market players at that time, particularly our friends-investor community had a lot of doubts about the level of transparency in the market.

“And we felt there is the need to establish a market where you will not find the hand of the CBN; people should be free to bring in foreign exchange into the country and take them out at will, but that the CBN, in line with the foreign exchange management policy can only come in at some points to intervene, either by supplying dollars into the market or buying dollar from the market to keep the price at the level that we think is within acceptable thresholds,” he had explained.

But speaking during a recent webinar, the founder, B. Adedipe Associates Limited, Dr. Biodun Adedipe, had said the pandemic had caused a reversal of capital flows from emerging and developing economies.

“That simply explains what Nigeria has been dealing with in terms of capital importation. In fact, if you look at the data, what we have seen was that for 2019, Nigeria experienced a lot more capital inflows than in 2018.

“But if you look at the quarterly figures, it has been dropping. But, where we are today is: Every man to himself and God for us. So, nobody is thinking about going to invest anywhere else. Everybody is concerned about survival first and foremost. Of course, income per capita is expected to decline in over 170 nations out of about 220 countries all over the world,” he had stated.

Also, Moody’s Investors Service recently pointed out that risks in the country have been exacerbated by the oil price shock and the financial and economic implications of the COVID-19 outbreak. Their view aligned with the position of other notable rating agencies as well as analysts and economists. And this is expected to result in a slowdown of inflows into the I & E window as well as the Nigerian economy.

According to Moody’s, the rapid and widening spread of the outbreak and related price shocks were creating an unprecedented credit shock across a wide range of regions and markets.

“For Nigeria, these shocks amplify existing credit vulnerabilities both over the immediate and longer term. In the near term, the significant drop in oil revenues will reduce an already extremely low tax base, undermining fiscal strength.

“Combined with possible capital outflows, pressure on the fragile balance of payments may intensify, threatening external stability. In the longer term, the impact of the coronavirus on growth, particularly in the large informal sector, may weaken economic strength,” it had said.