Total FX Market Turnover at I & E Window Jumped 11.1% to N64.61trn In 2022

Kayode Tokede

Foreign exchange turnover trade at the Investors’ & Exporters’ Window (I & FX) market rose to N64.61 trillion in 2022, about 11.1 per cent Year-on-Year (YoY) higher than N58.18 trillion in 2021, numbers released by FMDQ Exchange has revealed.

The I & E window of the foreign exchange market was created in 2017 by the Central Bank of Nigeria (CBN) to facilitate easy access to foreign exchange by investors and exporters at the official rate fixed by the apex financial industry regulator which is usually much lower than the parallel market rate.

The N64.61trillion turnover traded at I & E FX window in 2022 is coming on the backdrop of scarcity of foreign exchange and increasing business activities.

The Month-on-Month breakdown by THISDAY revealed that N4.22trillion was reported by FMDQ foreign exchange turnover trade in January and it dropped by 3.8per cent to N4.06 trillion in February.

In March, the figure by FMDQ Exchange showed N4.76trillion foreign exchange turnover trade and in April, it increased to N7.29trillion, second highest trade in 2022.

FMDQ Exchange reported N4.67trillion foreign exchange turnover trade in May; N5 trillion in June; N5.38trillion in July and N4.57trillion in August.

The data showed N7.21trillion in September, it dropped to N4.85 trillion in October. Foreign exchange turnover trade dropped further to N4.51trillion in November and hit N8.09 trillion in December, the highest trade in the year under review.

Experts believe FX trades at the I & E FX window was impacted by uncertainties in the global market following Covid-19 pandemic.

Speaking, the Head, Financial Institutions Ratings at Agusto & Co, Mr. Ayokunle Olubunmi, said, “the global economy in 2021 was coming out of COVID-19 pandemic and also in 2020, there were a lot of uncertainties in the global market. In 2022, we started see more clarity that the virus has been tackled.

“The global economy growth in 2022 was better than 2021. Nigeria economy growth also in 2022 was better than 2021. The growth in foreign exchange turnover trade in 2022 is as a rebound after COVID-19 pandemic.”

On his part, he vice president, Highcap Securities Limited, Mr. David Adnori stated that the growth recorded in the total foreign exchange turnover in 2022 to increasing business activities fuelled by double-dight inflation rate.  

Adnori blamed that the slow growth between October and November to change in Monetary Policy Rate (MPR) of the CBN that contributed to slow business activities on the backdrop of hike in lending rate by commercial banks.  

Despite increasing foreign exchange turnover trade, Naira against the Dollar depreciated by 8.25 per cent in its YoY growth.

In the FX Market, the Naira depreciated against the US Dollar, losing 8.25 per cent YoY or ($/N34.4) to close at an average of $/ N451.21 in December 2022 from $/N416.81 recorded in December 2021.

Olubunmi explained that the Naira depreciation is the function of demand and supply, stressing that the apex bank in the past 3-4 years has been struggling to meet demand for foreign exchange.

In a report titled, ”2022 review and 2023 macro-economic and financial markets outlook,” Investment One research said this year, a combination of limited inflows from crude oil sales, fragile capital flows and foreign remittances, would continue to hurt the local currency.

According to the report, “While the rising oil production volume is slightly positive for oil earnings and by extension, the reserves, we still think that crude oil production of less than 2.00million barrels is unlikely to significantly move the needle on exchange rate. In addition, elevated subsidy payments should curtail oil inflows, albeit the likely suspension of this cost at the 2nd half of the year should be positive for the reserves.

“With yields expected to remain elevated in the global economy, the return of foreign portfolio investors seems remote until risk adjusted returns becomes attractive. More so, the weak macro backdrop and lack of flexibility in exchange rate management remain a headwind for capital flows. With the likelihood of Eurobond borrowing slim, the possibility of an influx of the greenback to support the Naira looks unrealistic. However, the continual success of the RT200 FX scheme is a tailwind for the currency at the official market.”

“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.

“On the positive side, the commencement of operations at Dangote Refinery, slated for 2023, may bode positively for the economy given potential FX savings and inflows,” the report said.

Further investigation by THISDAY revealed that firms operating in Nigeria raised a whopping sum of N724.33 billion Commercial Papers (CPs) in 2022.

The report also disclosed that firms raised N578.48billion Corporate Bonds in the year under review.

CPs are short-term debt financing securities (no longer than 270 days in tenor) consisting of unsecured and discounted promissory notes issued by large corporations with good credit ratings, which can be readily traded.

Due to its relatively short maturity period, CP is referred to as low-risk investments, and offering competitive returns to investors in compensation for the issuer’s credit risk.

According to THISDAY investigations, Dangote cement and MTN Nigeria were the notable bond issuances in the period under review.

Dangote Cement Plc in May 2022 completed the issuance of N116 billion series 2 fixed rate senior unsecured bonds under its N300 billion multi-instrument issuance programme, while MTN Nigeria in October 2022 completed its N115billion Series 1 fixed rate bond issuance under its new N200billion bond programme and third bond issuance in the debt capital markets.

Union Bank of Nigeria, Julius Berger, Johnvents Industries Limited and Coleman Technical Industries were among the companies that accessed the CP market of the FMDQ.