Naira Depreciates By 16% In Investors And Exporters (I&E) Window As Demand Surges

Yesterday, the Nigerian naira experienced a depreciation of 16% against the US dollar in the Investors and Exporters (I&E) window, reaching a rate of N770.38 per dollar. This decline was a result of heightened demand for dollars aggravated by a severe shortage of supply.

Data from the Financial Markets Dealers Quotations (FMDQ) revealed that the indicative exchange rate for the I&E window rose from N663.04 per dollar the previous Friday to N770.38 per dollar, signifying a depreciation of N107.34 for the naira.

In contrast, in the parallel market, the naira appreciated to N755 per dollar from N759 per dollar the previous week.

Consequently, the exchange rate in the I&E window surpassed the parallel market exchange rate for the first time since 2019.

Forex market sources attributed the depreciation mainly to a surge in demand driven by over $3.7 billion matured Letters of Credit (LCs). The situation was exacerbated by a shortage of supply as the I&E window has yet to witness significant forex inflows since the Central Bank of Nigeria (CBN) reintroduced the willing seller, willing buyer model.

According to a source, transaction volumes remain minimal and primarily involve individuals with urgent forex needs who are willing to purchase at any exchange rate. Some of them had already been accustomed to buying dollars at the parallel market rate, thus being willing to pay above N700 per dollar.

These developments in the I&E window follow the new forex measures announced by the CBN on Wednesday. The measures include the abolition of segmentation and the collapse of all segments into the I&E window. Applications for medicals, school fees, BTA/PTA, and SMEs would continue to be processed through deposit money banks.

Furthermore, the CBN reintroduced the “Willing Buyer, Willing Seller” model at the I&E window, with transactions guided by the extant circular issued on April 21, 2017. The operational rate for government-related transactions would be the weighted average rate of the preceding day’s executed transactions at the I&E window.

Additionally, the CBN implemented the proscription of trading limits on oversold FX positions and allowed the hedging of short positions with Over-The-Counter futures. Limits on overbought positions were set at zero.

Other measures reintroduced include order-based two-way quotes with a bid-ask spread of N1, clearance of all transactions by a Central Counter Party (CCP), and the reintroduction of an Order Book to ensure transparency and seamless execution of trades.

The operational hours for trades would be from 9 am to 4 pm, Nigeria time.

The RT200 Rebate Scheme and the Naira4Dollar Remittance Scheme would be discontinued effective June 30, 2023.

Further guidance on these matters will be communicated in due course, and all market participants and the general public are urged to comply with these rules.