Turnover in I&E rises 24% to $29.7 billion in first-half 2018

The volume of dollars traded in the Investors and Exporters, I&E, window rose by 24.2 percent to $29.7 billion in the first half of the year, H1’18, from $23.9 billion traded in 2017.

Analysis of trading in the window also revealed that average daily transaction rose to $247.5 million in H1’18 from $170.9 million in 2017. Indication that this trend will persist in the second half of the year, H2’18 emerged last week, as the window recorded 8.5 percent increase in turnover.

Financial Vanguard analysis revealed that volume of dollars traded rose to $863.83 million last week from $796.02 million the previous week. This according to analysts at Afrinvest Limited, reflects investors preference for the I&E as platform for foreign exchange trade.

“Although the participation of the Central Bank of Nigeria, CBN, is estimated at 30 percent of the transactions in the window, the increased level of participation to some extent underscores the flexibility of the market as well as investors’ preference of the I&E as the platform for forex deals.

Increased turnover

“This has largely removed the pressures from the parallel market rate which now sometime, trade at a discount to the I&E rate”, they stated in the company’s half year economic review.

Notwithstanding the increased turnover, the naira depreciated for the second consecutive week in the window last week. Data from FMDQ showed that the indicative exchange rate rose further to 362.58 per dollar last week from N361.32 per dollar the previous week, translating to ₦1.26 depreciation of the naira.

The naira, however, appreciated by ₦2 in the parallel market as the market exchange rate dropped to ₦158 per dollar last week from N360 per dollar the previous week.

In his outlook for the exchange rate in July and August, Bismarck Rewane, Managing Director/Chief Executive, Financial Derivatives Company, said the naira will continue to be under pressure due to increased foreign exchange demand fuelled by implementation of the budget, dollar demand by people travelling for summer as well as capital outflows by foreign investors.

In his monthly economic review presented at the Lagos Business School, Rewane projected the naira to depreciate to N375 per dollar in the parallel market, while the CBN will support the naira aggressively by intensifying its intervention in the foreign exchange market.

Interbank money market to record ₦1.9 trillion net inflow in July

The interbank money market will record net inflow of ₦1.9 trillion this month.

Analysts at FSDH Merchant Bank made this projection last week, saying the market will record inflow of ₦2.02 trillion from maturing treasury bills, TBs, and statutory allocation, as well as outflow of ₦828 billion through government securities and other statutory sources.

Meanwhile, cost of funds trended downward in the market last week, following upsurge in market liquidity due to absence of liquidity mop up by the CBN, while inflow of ₦409.15 million through matured TBs, offset outflow of ₦102.31 billion via primary market TBs issued by the CBN.

Consequently, average short term interest rate fell by 151 basis points (bpts) to 12.13 per cent last week from 13.63 per cent the previous week.

Analysts project more CPs in H2’18 as 4 firms raise ₦178bn

The Commercial Paper, CPs, segment of the money market received a boost in H1’18 with four firms raising ₦178 billion in quest for cheaper source of funds. The firms are Sterling Bank which raised ₦54.3 billion, Access-N25.2 billion, FSDH Merchant- N18.6 billion, Nigerian Breweries-₦15.8 billion, Coronation Merchant -₦15 billion and Dangote Cement-N50 billion.

Analysts at Afrinvest Limited projected that more firms will issue CPs in H2’18, in a bid to avoid high lending rate charged by banks. “With probable moderation in the crowding out of treasury short term instruments, Corporates are likely to continue favouring Commercial Papers than approaching Banks for working capital funding at commercial rates. We remain optimistic that the expectation of more issuances will make the secondary market for Commercial Papers more active for traders to explore in H2’ 18″, they stated.

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