The Exporter/Importer Forex Window launched by the Central Bank of Nigeria (CBN) to deepen dollar inflows to the economy has recorded $1 billion deals in the last six weeks, Managing Director, Financial Derivatives Limited, Bismarck Rewane, has said.
In the company’s economic report, released at the weekend, he said the CBN introduced a new foreign exchange window for investors and exporters targeted at increasing forex supply in the market and allowing the timely settlement of transactions.
“So far, approximately $1billion has been traded at this window. The spread between the parallel and interbank markets narrowed to N76.15 (May 30) compared to N83.65 as at April 28,” he said.
The economist said the naira at the parallel market appreciated by 2.63 per cent to close at N380/$ as at May 30, compared to N390/$ in April. At the interbankmarket, the naira gained marginally by 0.16 per cent to close atN305.90/$ from N306.85/$ in April. This was mainly driven by thenew forex policies and regular intervention in the market by the CBN.
“We expect the naira to appreciate further in the coming monthdue to the CBN’s increased dollar sale to BDCs, the interventionfor SMEs and favorable forex policy for investors, exporters andend-users. The threat to this is the uncertainty surrounding oilprices. Oil prices fell below $50pb in May before recovering to$52pb. Nonetheless, any further decline in oil prices could depletethe external reserves level, and hence hinder the CBN’s ability tointervene as frequently as possible,” he said.
He said Nigeria’s gross external reserves decreased by 1.19 per cent ($37million) to$30.49billion as at May 25 from $30.86billion recorded at the end ofApril.
“The decline in the external reserves level was due to fundingfor mature contracts and obligations. The gross external reservesimport and payment cover is down to 6.83 months lowercompared to April’s level of 6.90 months,” he said.
On the ongoing appreciation in the stock market, Rewane said: “We posit that the recent positive developments in the forex market, the expectation of an economic rebound following improvedoil revenues, successful external borrowings and a possibleimplementation of the government’s roadmap to economic recovery, have contributed to the extended rally on the Nigerian bourse.We expect this rally to persist till month-end, without excludingthe possibility of profit taking.”
Rewane said the Nigerian equities market gained 6.81 per cent, hitting aseven-month high of 28,423.70 points in the first twoweeks of May. The Year-to-date return on the index turned positive, to 2.38 per cent, while market capitalisation closed at N9.51trillion.
He said continued investor interest in bellwether stock as well as the perceptionof an improving economy, saw the Nigerian equities marketsustain its upward trend.
“The NSE ASI moved above the28,000 points psychological threshold for the first time since October2016 before retracting to 27,513.69 points as at May 15,2017. This represents a gain of 6.81 per cent,” he added.
According to Rewane, the year-to-date return on the index moved into positive territory, for the first time this year, to 2.38 per cent, while total market capitalizationwas N9.51trillion after it gained N597.9billion in the review week. “Themarket is currently trading at a price to earnings ratio of 14.5 times from 13.5 times at the end of April 2017. Daily changes, representingvolatility on the ASI, ranged between -2.41 per cent and 3.18 per cent duringthe review period,” he said.
Source: The Nation
