The total inflows into the Investors and Exporters Window rose to $2.55bn in the months of May and June, according to data obtained from the FMDQ.
The data indicated that total inflows into the 1&E window increased for the second consecutive month in June to $1.41bn from $1.14bn in May, following the unification of naira rates.
A breakdown of the data revealed that foreign inflow was $298.8m in June but remained underwhelming relative to pre-pandemic levels when the monthly average was $1.56bn.
Local inflows continued to sustain the market, hitting $1.11bn in June because of higher inflows from non-bank corporates ($597.10m) and exporters ($448.00m).
Commenting on the development, Codros Securities said, “We expect the lingering reforms in the FX market to translate to improvements in FX liquidity conditions over the medium term as market participants’ confidence builds up.
“However, we think foreign investors will likely adopt a wait-and-see approach in the near term as they await the CBN’s actions in clearing its FX backlogs and the direction of short-term interest rates amid high inflation.”
Codros Securities further stated that with international oil companies getting permission from the CBN to resume selling dollars to dealing member banks, FX liquidity in the I&E market would likely improve over the medium term, supporting the local currency.
It added, “On the one hand, we expect the computation changes to improve transparency in the computation of the spot FX rates and provide a clearer picture of the FX rates reflective of the market realities at different times, albeit with increased intraday volatility.
“On the other hand, the IOCs being permitted to sell their USD to dealing members will likely increase FX liquidity in the IEW over the medium term, supporting the local currency.”
Meanwhile, the country’s forex reserve continued to weaken for the seventh consecutive week, falling by $60.27m week-on-week to close at $34.06bn as of July 6, 2023.
The improvement in FX inflows had been attributed to the recent exchange rate unification move of the CBN.
Punch