The Investors' & Exporters' Window (I & FX) market's foreign exchange turnover transactions increased by roughly 11.1% to N64.61 trillion in 2022. YOY more than N58.18 trillion in 2021, according to data supplied by FMDQ Exchange.
The Central Bank of Nigeria (CBN) established the I & E window of the foreign exchange market in 2017 to make it simpler for investors and exporters to access foreign currency at the official rate set by the top financial industry regulator, which is typically much lower than the parallel market rate.
The I & E FX window's N64.61 trillion turnover handled in 2022 will occur against the backdrop of a dearth of foreign currency and escalating commercial activity.
According to Prime 9ja Online's Month-on-Month analysis, FMDQ foreign exchange turnover trade reported N4.22 trillion in January and N4.06 trillion in February, a 3.8% decrease.
The number provided by FMDQ Exchange for foreign exchange turnover trade in March was N4.76 trillion, and in April it jumped to N7.29 trillion, the second-highest trade in 2022.
In May, N4.67 trillion in foreign exchange turnover trading was reported by FMDQ Exchange, followed by N5 trillion in June, N5.38 trillion in July, and N4.57 trillion in August.
According to the figures, the amount was N7.21 trillion in September and N4.85 trillion in October. The amount of foreign exchange turnover trade increased in December to N8.09 trillion, the largest transaction of the year under review, after dropping further to N4.51 trillion in November.
According to experts, the Covid-19 pandemic-related market uncertainty had an impact on FX trades at the I & E FX window.
Speaking, Mr Ayokunle Olubunmi, Head of Financial Institutions Ratings at Agusto & Co, stated, "The world economy in 2021 was emerging from the COVID-19 pandemic, and there were also many uncertainties in the global market in 2020. We began to see more clearly in 2022 that the virus had been defeated.
“The global economic growth in 2022 was better than in 2021. Nigeria's economic growth also in 2022 was better than in 2021. The growth in foreign exchange turnover trade in 2022 is as a rebound after the COVID-19 pandemic.”
On his part, the vice president, of Highcap Securities Limited, Mr David Adnori stated that the growth recorded in the total foreign exchange turnover in 2022 to increasing business activities fuelled by a double-digit inflation rate.
Adnori blamed the slow growth between October and November on to change in the Monetary Policy Rate (MPR) of the CBN that contributed to slow business activities on the backdrop of hikes in lending rates by commercial banks.
Despite increasing foreign exchange turnover trade, Naira against the Dollar depreciated by 8.25 per cent in its YoY growth.
In the FX Market, the Naira depreciated against the US Dollar, losing 8.25 per cent YoY or ($/N34.4) to close at an average of $/ N451.21 in December 2022 from $/N416.81 recorded in December 2021.
Olubunmi explained that the Naira depreciation is the function of demand and supply, stressing that the apex bank in the past 3-4 years has been struggling to meet the demand for foreign exchange.
In a report titled, ”2022 review and 2023 macro-economic and financial markets outlook,” Investment One research said this year, a combination of limited inflows from crude oil sales, fragile capital flows and foreign remittances, would continue to hurt the local currency.
According to the report, “While the rising oil production volume is slightly positive for oil earnings and by extension, the reserves, we still think that crude oil production of fewer than 2.00 million barrels is unlikely to significantly move the needle on exchange rate. In addition, elevated subsidy payments should curtail oil inflows, albeit the likely suspension of this cost in the 2nd half of the year should be positive for the reserves.
“With yields expected to remain elevated in the global economy, the return of foreign portfolio investors seems remote until risk-adjusted returns become attractive. More so, the weak macro backdrop and lack of flexibility in exchange rate management remain a headwind for capital flows. With the likelihood of Eurobond borrowing slim, the possibility of an influx of the greenback to support the Naira looks unrealistic. However, the continual success of the RT200 FX scheme is a tailwind for the currency at the official market.”
“While the nation’s FX reserves may proffer support for the currency, we highlight that the CBN will continue to allow the Naira to weaken to c. N480/$ – N490.00/$ at the I & EFX window during the year to aid marginal improvement in the balance of payment. As such, we opine that we might not see a devaluation in the Naira beyond that level.
“On the positive side, the commencement of operations at Dangote Refinery, slated for 2023, may bode positively for the economy given potential FX savings and inflows,” the report said.
Prime 9ja Online conducted additional research, which showed that companies operating in Nigeria raised a staggering N724.33 billion in commercial papers (CPs) in 2022.
Additionally, the survey revealed that companies raised N578.48 billion in corporate bonds during the studied year.
CPs are easily traded, short-term debt financing securities with tenors of no more than 270 days that are both unsecured and discounted and issued by sizable companies with solid credit ratings.
CP is regarded as a low-risk investment due to its relatively short maturity time and provides investors with competitive returns in exchange for the issuer's credit risk.
Dangote cement and MTN Nigeria were the significant bond issuances during the time period under consideration, according to Prime 9ja Online's findings.
While MTN Nigeria completed its N115 billion Series 1 fixed rate bond issuance in October 2022 as part of its new N200 billion bond programme, Dangote Cement Plc completed the issuance of N116 billion Series 2 fixed rate senior unsecured bonds in May 2022 under its N300 billion multi-instrument issuance programme.
Among the businesses that had access to the CP market of the FMDQ were Coleman Technical Industries, Julius Berger, Johnvents Industries Limited, and Union Bank of Nigeria.