Foreign exchange inflow through the Nigerian Autonomous Foreign Exchange market (NAFEX) also known as the Investors’ and Exporters’ window declined to the lowest since the beginning of this year last month as investors remained cautious ahead of the 2019 elections.
Compared to $3.58 billion which flowed in through the window in September, forex inflow through the I&E window dropped to $2.08 billion in the month of October as the Central Bank of Nigeria (CBN) remained the largest contributor at the window.
According to analysts, the drop in the level of inflow at the I&E is an indication of foreign investors’ apathy for investments in Nigeria at the moment, as they noted that some investors are adopting a careful approach to investing in Nigeria on account of political considerations.
The window had seen an inflow of $2.2 billion in July and $3.13 billion in August this year before the October decline. The CBN had accounted for 43.07 per cent of the inflow at the market followed by Foreign Portfolio Investors (FPI) with 25.18 per cent while non-bank corporates contributed 21.15 per cent of the total inflow in October.
The value of the Naira depreciated further at both the inter-bank and parallel markets in October 2018, compared with September 2018, as the premium between the inter-bank and parallel markets widened further.
Analysts at FSDH noted that this is an indication of persisting demand pressure in the foreign exchange market. “As noted earlier, the implication of the persisting foreign exchange demand pressure is that the CBN will maintain the current tight monetary policy stance.”
The CBN has maintained it intervention in the foreign exchange market to cushion demand pressures and ensure exchange rate stability. It had sold a total of $9.499 billion in the first six months of the year comprising of$1.546 billion at the inter-bank spot, $768.70 million for invisibles, $637.00 million for SMEs, $1.236 billion at the I&E window, while forwards sales were $5,311.09 million.
The value of the Naira depreciated by 0.08 per cent at the inter-bank market in October to N306.6 to the dollar compared with September. Similarly, the average exchange rate at the inter-bank market depreciated by 0.07 per cent to stand at N306.5 per dollar in October, compared with N306.27 in September.
The value of the Naira also depreciated month on month at the parallel market to N362 to the greenback as at end of October 2018, a depreciation of 0.28 per cent from N361 as at the end of September. The average exchange rate at the parallel market depreciated by 0.26 per cent to stand at N361.27 in October, compared with N360.353 in September.