Investors and exporters traded N8.29trillion worth of foreign exchange at the FMDQ market in the first two months of 2022, the FMDQ Exchange has disclosed.
It recorded an increase of 9.7 per cent compared to N7.55 trillion total foreign exchange turnover traded in the first two months of 2021.
FMDQ, in its Fixed Income and Currencies (FIC) monthly report, disclosed that FX trade in January 2022 rose by 29 per cent year-on-year (YoY) to N4.22trillion or $10.13billion from N3.26trillion or $8.29billion reported in January 2021.
In February, the total FX turnover trade dropped by 5.36 per cent YoY to N4.06trillion or $9.75billion in February 2022 from N4.29trillion or $10.60billion reported in February 2021.
Analysts believe increasing business activities have played a critical role in the FX demand stressing that the Central Bank of Nigeria (CBN) sustained interventions have reduced pressure.
Commenting, an analyst at PAC Holdings, Mr Wole Adeyeye, attributed the growth recorded in the total foreign exchange turnover to increasing economic activities in the first two months.
He noted that the slow growth in business activities in the first two months of 2021 affected foreign exchange turnover, maintaining the global economy over uncertainty due to restrictions.
He said: “The restrictions had affected investors and exporters demand for FX in the first two months of 2021. There was also volatility in the foreign exchange market.
“However, with the vaccines discover that eventually led to ease on movement in 2022, investors and exporters surge for FX from the FMDQ market increased and it reflected in the amounts.”
Also, the Chief Operating Officer of InvestData Consulting Limited, Mr Ambrose Omordion, attributed the growth to increasing demand for FX, maintaining that the global economy was expected to have expanded in 2022 but might be slowed down due to the crisis between Ukraine and Russia.
According to Omordion, the domestic economy has seen more business activities in the first two months of 2022 and demand for FX has increased significantly.
However, the increasing foreign exchange turnover at the FMDQ impacted Naira appreciation in February 2022.
The FIC report noted that Naira appreciated against Dollar, gaining 0.06 per cent N0.23 against the Dollar to close at an average of N416.32 against the Dollar in February 2022 from N416.55 against the Dollar recorded in January 2022.
Similarly, the Naira depreciated against the dollar in the parallel market, losing 0.77 per cent or N3.65 against the Dollar to close at an average of N478.35 against the Dollar in February 2021 from N474.70 against the Dollar recorded in January 2021.
In its recent report, the Chief Executive Officer, Centre for the Promotion Of Private Enterprise (CPPE), Dr Muda Yusuf had, highlighted that the country s foreign exchange challenges are fueling inflation, eroding investors’ confidence, aggravating the cost of operations & fees of production and accelerating business mortality.
“Meanwhile, the official exchange rate remains fixed at N416/dollar. This also signposts the widening gap between the parallel and the official market rate with its attendant distortions in the economy. The operating exchange rate for economic players remains the similar market rate because the I & E window is not liquid.
“The second dimension of the foreign exchange problem is the liquidity challenge in the Investors and Exporters window. The twin problem of the precipitous currency depreciation and the worsening liquidity crisis in the foreign exchange market constitute major headwinds to economic performance and investment growth. These forex challenges are fueling inflation, aggravating the cost of operations & costs of production, accelerating business mortality and eroding the confidence of investors, “he said.
In addition, the data from the FMDQ’s FIC report revealed that Turnover in the Fixed Income and Currencies (FIC) market dropped by 11.01 per cent to N28.36trillion between January and February 2022 from N31.87trillion in the prior months under review.
The breakdown revealed that “Turnover in the FIC markets in February 2022 was N14.23trillion, representing a MoM1 increase of 0.71per cent (N0.10trillion) and a YoY decrease of 24.67per cent (N3.5 1trillon) from Turnover in January 2022 and February 2021, respectively.
