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Forex sales decline 35% in Q1 on fictitious import bills


 In spite of increased Central Bank of Nigeria (CBN)’s intervention at both Wholesale Dutch Auction System (WDAS) and special sales, total foreign exchange sales in the first quarter of 2013 declined by 35 percent to $3.89 billion from $6 billion in the first quarter of 2012, Bismarck Rewane, chief executive officer of Financial Derivatives Company Limited has said.

The reduction of forex sales according to him is because previous import bills were inflated by fictitious petroleum imports.

Rewane, who made a presentation on Monthly Economic News and Views at Lagos Business School Executive Breakfast Meeting said Subsidy scam clampdown has helped reduce the ghost imports.

Total volume of forex sold by the CBN in March 2013 stood at $1.9bn. This represents 65.22 percent higher than $1.15bn sold in February 2013.

From his presentation, domestic economic performance of the external sector in the first quarter of 2013 showed that Foreign Portfolio Investments (FPIs) into Nigeria was down to 39.3 percent (N140.8bn) in February 2013, as domestic participation picks up to 60.7 percent. Also it showed that there was steady decline in FPIs from a high of 66.8 percent (N847.9bn) in 2011.

On the other hand, domestic economic performance of the money market in the first quarter of 2013 revealed money supply grew by 2.86 percent in February, showing an annualised growth rate of 17.16 percent.

He stated that high liquidity in the system put a downward pressure on interest rates as Federation Allocations Account Committee (FAAC) of N888bn and N400bn capital votes or 7 percent of M2 increased liquidity significantly.

Average inter-bank call and OBB rates were 11.43 percent and 11.16 percent respectively, showing a disconnect between market rates and Monetary Policy Rate (MPR) as real interest rates remain positive, he sated in his presentation.

According to Rewane, leading economic indicators were mostly negative in March, while positive growth of 5.39 percent and 7.85 percent were recorded in external reserves and market capt respectively. Average Nigeria Interbank Offered Rates (NIBOR) continue downward trend, disconnected from MPR, 100bps above. Also there was Naira depreciation of 1.13 percent at the interbank market even as Naira depreciated by 1kobo at the official market.

His outlook for the foreign exchange market is that Naira pressure will continue in the forex market while the CBN’s intervention will continue to protect the Naira.