Business

‘FX inflows via I&E window fell to $877m in August’

Foreign capital inflow into the Nigeria economy through the Investors and Exporters’ (I&E) window dropped to $877 million in the month of August, a 17.3 per cent decline from the $1.06 billion recorded in the previous month, a report by Comercio Partners Asset Management shows. The report also shows that FX inflows from local sources also headed south in August, dropping by 36 per cent from the previous month to record $354 million inflows.

However, the report stated that FX inflows from foreign portfolio investments (FPIs), other foreign sources and the CBN rose by 3.6 per cent, 17.6 per cent and 0.8 per cent respectively when compared to the $165.4 million, $44.4 million, and $279.4 million recorded in the previous month. According to the report, “foreign capital inflow into the Nigeria economy through the I&E FX Window fell to $877 million in the month of August, a 17.3 per cent decline from the $1.06 billion recorded the previous month of July.

“Across all listed channels of FX inflow into the country, other local sources were the only decliner, posting a decline of 36 per cent from the previous month to record $354 million inflows. FX Inflows from FPIs, other foreign sources and the CBN edged up by 3.6 per cent, 17.6 per cent and 0.8 pet cent respectively when compared to the $165.4 million, $44.4 million and $279.4 million recorded in the previous month.”

Furthermore, the report indicates that FX outflow through the I&E window fell to $801.4 million in the month of August, a 19.8 per cent decline when compared to the $999.6 million recorded for the previous month. It also stated that during the same period, there was 30.6 per cent and 28.7 per cent reduction in outflow from other local and foreign sources, while outflows from FPIs and CBN increased by 8.3 per cent and 81.8 per cent respectively. Thus, according to the report, I&E FX Netflow for the month of August 2021 stood at $75.5 million, a 24 per cent increase from the previous month when $60.5 million was recorded.

“It is important that to note that August 2021 netflow places as the highest recorded in over a year,” the report said. New Telegraph reports that analysts at United Capital Research, in a recent note, attributed the surge in demand for dollars at the parallel market, which has resulted in the naira crashing to record lows in that segment of the forex market, to the Central Bank of Nigeria (CBN) inadequate intervention at the I&E window in the last few weeks. The analysts stated: “Over the past week, renewed pressures have resurfaced in the parallel segment of the FX market with exchange rate closing at N520.00/$, from a pre-Bureaux De Change (BDC )FX ban low of N505.00/$. “The sudden pressure at the parallel market coincides with a period of sustained decline in level of transactions at the Investors and Exporters (I&E) window.

To give context, average turnover at the I&E window has declined by 12.0 per cent, 1.7 per cent and 21.3 per cent w/w in each of the last three weeks, from $158.9 billion to $107.9 billion as at the week ended August 20. “At the last Monetary Policy Committee (MPC) meeting, the CBN governor had announced the decision to halt the sale of FX to BDCs operators. In doing so, the governor assured the CBN would sustain FX sales to banks who will now become the new distribution channels for retail FX demand.

This, helped to allay the knee-jerk reaction trailing the decision as exchange rate at the parallel market trended lower. “However, in light of the recent pressures coinciding with sustained period of decline in I&E window transactions, we suspect reduced intervention at the I&E window may have moved demand to the limited parallel market, pushing exchange rate higher. In addition, our survey of anecdotal sources in the parallel market revealed there exists scarcity of forex in the parallel market as demand outweighs supply giving unmet demands in the NAFEX window.”

 

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