Foreign exchange (FX) turnover at the Investors’ and Exporters’ (I&E) window rose by 19.2 percent to $161.16 million in July 2021, from $139.35 million in June 2021, the Central Bank of Nigeria (CBN) said in its latest report.
This, according to the CBN was due to increased activities at the I&E window during the review period, which resulted in a significant improvement in turnover.
Nigeria’s Central Bank maintained a low profile in its intervention activities in the foreign exchange market, due, majorly, to the stoppage of sales to Bureau De Change (BDC) operators.
In exercise of its statutory obligation of maintaining the foreign exchange reserves, safeguarding the value of the naira, and curtailing sharp practices, the CBN announced the cessation of its weekly sale of foreign exchange to BDCs at the MPC meeting of July 27, 2021. Furthermore, the Bank suspended licensing of BDC operators in the country and re-channelled forex sales to commercial banks to meet Personal Travel Allowance (PTA), Business Travel Allowance (BTA), and other customers’ retail needs.
Consequently, total foreign exchange sales to authorised dealers by the banking sector regulator decreased by 9.3 percent to $2.05 billion in July 2021, compared with $2.26 billion at the end of June 2021.
Disaggregation shows that foreign exchange intervention sales at the Secondary Market Intervention Sales (SMIS) and Investors’ and Exporters’ windows rose by 17.6 per cent and 34.8 per cent to $0.78 billion and $0.26 billion, respectively.
The CBN’s interventions at the Interbank, SMEs, and Swaps, fell by 26.4 per cent, 22.6 per cent, and 47.2 per cent to $0.17 billion, $0.12 billion, and $0.27 billion, respectively, compared with the previous months’ level. Similarly, foreign exchange sales to BDC fell by 11.8 per cent to $0.44 billion in the review period.
The CBN’s decision to suspend the sale of foreign exchange to the BDCs permeated the foreign exchange market, leading to an initial reaction of a fall in rates in all the segments. Hence, the naira depreciated by 0.2 per cent, and 0.02 per cent at the interbank, and the I&E window of the foreign exchange market, respectively, in July 2021.
Despite the contraction in autonomous inflow, the report noted that the upward trajectory in crude oil prices improved foreign exchange inflow through the CBN, resulting in an overall net inflow in July 2021.
Aggregate foreign exchange inflow into the economy declined by 7.4 percent and 8.7 percent to $6.10 billion, compared with the level in June 2021 and July 2020, respectively. The decrease reflected, mainly, the contraction in inflow through the autonomous sources, which fell by 33.3 per cent to $2.79 billion in July 2021. However, foreign exchange inflow through the CBN increased by 37.7 percent to $3.31 billion in July 2021, as oil-related inflow increased due to the upward trajectory in oil prices.
Foreign exchange outflow through the economy fell by 23.0 per cent to $3.33 billion in July 2021. The fall in outflow was due, mainly, to a decrease in the CBN’s intervention in the foreign exchange market and lower direct payments, which reduced the outflow through the Bank. However, outflow through autonomous sources inched up by 12.4 percent to US$0.67 billion in July 2021, due, majorly, to the 13.2 percent increase in payments for invisible import.
Overall, foreign exchange flows resulted in a higher net inflow of $2.77 billion in July 2021, compared with $2.27 billion in June 2021. From this number, net inflow through the CBN was $0.66 billion, while through autonomous sources amounted to $2.11 billion.