The daily trade volume on Nigeria’s inter bank foreign exchange market rose astronomically to $245 million on July 22 according to a report seen by BusinessDay.
Total foreign exchange volume traded during the week ending July 22 also climbed to $356m, a sign dealers say shows the market is working with the exchange rate beginning to tickle those with dollars to sell.
According to the report, total FX traded on Monday July 18 stood at $11.7m in 18 transactions but this rose to $36.36m on Thursday July 21 in 42 transactions and then hit a high of $245.64m the following day with 123 transactions being recorded.
The smallest daily volume for the week was traded on Tuesday July 19 when volume recorded stood at a mere $1.88m with only two transactions.
The last transaction for the week was recorded at an exchange rate of N300 to the USD on a day the market witnessed significant volatility.
Bola Onadele, CEO at FMDQ says “CBN strategies to attract capital have to be sustained. Asset (treasury bills and FGN bonds) yields have to be competitive, whilst price formation must remain highly credible.”
He adds that “FPIs and FDIs are key to the success of the new FX market as CBN interventions may be finite. It is also imperative that the CBN at this juncture takes a second look at its approach to the 40 of the 41 items prevented from accessing FX from the inter-bank market as the FX demand related to these products in the parallel market is stoking that market and leading the currency market.
“The relevance of the parallel market as a reference point should be immediately ended. There are very compelling reasons to invest in Nigeria at the moment and the CBN deserves commendation.”
The rise in the daily trade volume coincides with what the dealers called a return of a semblance of market independence which allows for the forces of demand and supply to play out without let or hindrance.
Bismarck Rewane, CEO of Financial Derivatives believes that the rate of dollar inflow into Nigeria will rise on the back of market stability and market efficiency and suggests that the Central Bank should strive to improve market liquidity by regular intervention in the market.
The apex bank has largely stayed away from the market although it retains its right to intervene to set direction for the market.
Since the new inter bank foreign exchange market opened, investors, especially foreign portfolio managers, have watched and waited in the hope that the market will be independent and that rates will go across the N300 threshold many had set as the point of interest.
That level was achieved on Friday and FX dealers said they expect the daily volume traded to rise even further in the weeks ahead.
On Friday, the Central Bank directed banks and other authorised dealers to commence the sale of proceeds of international money transfers to Bureau de change operators, a measure dealers said will moderate the wild price movements on the parallel market which has strangely become the rate setter for the national currency.
Nigeria recorded foreign remittances of about $22bn in 2014 alone but it is unclear what the 2016 total will be.
