Investorts FX window’s tournover sheds 27.8% to $14.34m

Turnover trade at the Investors and Exporters Foreign Exchange (I&E FX) window recorded a reversal on Wednesday,  as it dropped by 27.8 per cent $14.34 million at the close of trading activities on Wednesday. 

This is according to data from the FMDQOTC, an exchange where foreign exchange is traded by foreign investors and exporters.

According to FMDQ Group, foreign exchange turnover  fell  from $14.37 million on Tuesday to $10.37 million on Wednesday, representing a significant drop of  27.8 per cent on a day-to-day basis.

This is a sharp reversal from the 242per cent gain recorded a day earlier and also the lowest turnover recorded in the I&E window since last week.

This reinforces the volatile and uncertain nature of the foreign exchange market with trading volumes apparently irregular piling pressure on the exchange rate at the NAFEX market and by extension the parallel market.

The  volatility and uncertainty of the foreign exchange market seem to persist  due to liquidity shortages across markets.  Liquidity remains quite tight in the foreign exchange market, with the average turnover in the I&E market significantly down to about $45.5 million in the month of May compared to $297.5 million that was recorded in January.

The accumulated demand for forex in the market could be between $1.5 and $5 billion as supply shortages persist. Foreign exchange shortages have persisted since the crash in oil prices coincided with the global lockdown due to COVID-19.

The rise in demand and contrasting drop in supply has called for another round of devaluation, which the CBN has insisted it has plans to implement. A devaluation last occurred in March. The activities of the speculators seem to have continued unabated.

Speculators have thus patronized the parallel market, otherwise known as the black market, thereby widening the gap between it and the I&E window. The CBN maintains that the perceived demand cannot be substantiated as the lockdown induced by the COVID-19 pandemic suggest demand should be low due to travel restrictions and drop-in economic activities.

The further decline in liquidity could further fuel speculations in the black market where the exchange rate has traded at a premium of N60 over the last few weeks.

However, at the I& EFX window, while the Naira lost by 0.84per cent and 0.18 per cent against the Pounds and Euro to close at N482.38 and N435.51 respectively, it closed flat against the Dollar printing at N386.50.

At the parallel market, the Naira closed flat against the Euro and Pounds to print at N505 and N560 respectively, while it inched down slightly vs the Dollar by 0.43per cent closing at N462.

“Going forward, we expect the FX market to be dictated by heightened dollar demand and CBN FX policies,” analysts at investmentone said.