Transactions in the Central Bank of Nigeria (CBN) foreign exchange window for investors and exporters continue to signal increased confidence in the economy, as trade by investors surged 30.55 percent last week.
This is even as more banks followed GTBank’s leading by raising the spending limits on their international naira payment cards.
Guaranty Trust Bank (GTBand) announced on 10 July that is raising the monthly international spend limit on its naira MasterCard by 900 percent.
“The monthly International spend limit on our naira MasterCard has been reviewed upwards from $100 to $1,000, effective July 10” GTB, Nigeria’s largest bank by market capitalisation, said in a July 10 note to customers.
Since then, some other banks have followed with similar announcements. United Bank for Africa (UBA) and Stanbic IBTC have both announced increases on their dollar spending limits on Naira card to US$1000 a month signally the improved dollar liquidity in the banking system.
The improved dollar liquidity is seen in the I&E FX Window which recorded a total of $407.40mm transactions for the week-ended July 7, 2017, a 30.55 percent increase from $312.06mm recorded the previous week, bringing the total volume traded at the Window since its inception to $4.15bn.
Analysts say the increase volume of transactions is an indication that investors are getting more comfortable using the window for their transactions. Sources in the banking industry say at least 70 percent of the transactions in the window are from foreign investors most of whom have taken advantage of the window to invest in stocks and government securities.
Dollar liquidity in the market is supported by the CBN’s continued supply of US dollars in the FX markets, offering $100.00mm at a marginal rate of $/₦320.00 via a single Secondary Market Intervention Sales (SMIS) – wholesale session held during the week. The apex bank also sold $50.00mm to Small- and Medium-Scale Enterprises (SMEs) and $45.50mm for Retail Invisibles transactions.
Since March, the CBN has stepped up foreign exchange sales to importers, SMEs and retail end users. It also created a new window meant to serve investors and exporters (NAFEX), where rates are market determined.
These steps have culminated in the CBN selling close to $6 billion and eased some pressure off the naira. It has also led to a 20 percent exchange rate appreciation year-to-date.
The improved liquidity has also resulted in improved stability in the exchange rates. The exchange rate in the Bureau de Change (BDC) market closed at $/₦367.00 on 14 July ; a marginal increase of 0.27 percent from the rate reported the previous week-ended July 7, 2017.
On the other hand, the CBN official rate declined marginally by $/₦0.10 to close at $/₦305.90, indicating a 0.03 percent decrease when compared to $/₦306.00 reported at the end of the previous week-ended July 7, 2017
Therefore, the spread between the BDC and the CBN official exchange rates rose by $/₦1.10 to $/₦61.10, representing a 1.83 percent increase from the spread of $/₦60.00 recorded for the previous week-ended July 7, 2017
In the Over the Counter FX Futures market, $45.47mm was traded in four (4) deals, compared to the previous week’s total of $59.48mm in four (4) deals.
Trading activity in the Spot FX market between the banks and their clients stood at $900.99mm (average daily turnover of $180.20mm), representing a 56.21 percent increase from the $576.77mm (average daily turnover of $192.26mm), recorded in the previous week.
Activity in the Spot FX market amongst banks for the same trading week revealed a 13.81% percent increase, as a total turnover of $147.05mm (average daily turnover of $29.41mm) was recorded against the $129.20mm (average daily turnover of $43.07mm) reported the previous week.