As the foreign exchange market continued to be flooded with dollars sold by the CBN from its several windows, analysts and operators in the Nigerian foreign exchange market say the policies of the Central Bank of Nigeria (CBN) has increased the dollar liquidity in the market as the challenge is no longer getting foreign exchange but getting the naira to buy the dollars.
Speaking variously at Access Bank 2017 FX Seminar in Lagos , analysts and operators said the Investors’ and Exporters’ window opened by the CBN recently has helped in building up confidence in the system and seen more offers than bids at the forex market.
Managing Director and Chief Executive of Access Bank, Herbert Wigwe, at the event stated that asides the I&E window, “the recently opened SMIS window wherein the CBN has persistently sold forex to all market participants with varied needs, has further lent credence to the CBN’s mandate to boost liquidity in the market and foster the timely execution of all eligible transactions.”
These, he said, had led to increased supply of forex to the markets, a narrowing of the spread between the official and parallel market rates as well as a declining inflation. Inflation had been on the decline since February this year from a high of 18.72 per cent in January to 17.26 per cent in March 2017. Also, the gap between the value of the naira at the interbank and parallel market has also closed
Envisaging that the new and positive tide will persist, Wigwe suggested that “we as regulators, market participants and businesses sit down together to understand the modus operandi of the recently introduced forex markets and how it will impact on our businesses going forward.”
Access Bank’s Group Head, Global Markets, Dapo Olagunju, noted that there are more people at the I&E window who want to sell foreign exchange than those wanting to buy. Assuring that the era of dollar scarcity may be nearing its end, Olagunju said the capacity of the CBN to sustain its interventions in the forex market will increase as the effect of the rising oil price and production output begin to reflect on the revenue receipts of the government.
Associate Vice President, Market Development and Regulation at FMDQ OTC, Jumoke Olaniyan noted that the Nigerian forex market is halfway to getting a free float as the I&E window allows the value of the n aria to be determined by the forces of demand and supply.