Nigeria: Naira Depreciates As Turnover Rises in Forex Market

The volume of dollars traded (turnover) in the Investors and Exporters (I&E) window of the foreign exchange market grew by 26 per cent, month-on-month, to $5.3 billion in November from $4.2 billion in October, 2019.

This represents the first monthly increase in the monthly turnover since August.

Turnover in the window rose by 75 percent to $7 billion in August, courtesy of increased inflow from foreign portfolio investors (FPIs). Monthly turnover, however, dropped by 44 percent to $4.4 billion in September, from where it further fell to $4.2 billion in October, before rising by 26 percent to $5.3 billion in November.

Financial Vanguard analysis of weekly turnover in the window showed that $112.88 million was traded in the first week of November, while $1.4 billion was traded in the second week. In the third week, turnover rose 14 percent to $1.6 billion but fell by 25 percent to $1.2 billion in the fourth week and down again by 17 percent to $991.68 million in the fifth week of November.

However, the naira depreciated by six kobo in November as the indicative exchange rate of the window rose to N362.81 per dollar on November 29 from N362.75 per dollar on November 1. Analysts, however, expect the naira to remain stable at current levels in the various segment of the foreign exchange market due to continued intervention by the CBN.

Cost of funds to remain low

Cost of funds will remain low in the interbank money market this week due to inflow of N344 billion from maturing treasury bills which would aggravate the excess liquidity situation in the market.

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