Babajide Komolafe
15 September 2008
Foreign exchange purchases by banks through the Wholesale Dutch Auction (WDAS) rose sharply by over 100 per cent in two months to peak at $4.026 billion in August.
L-R, Executive Director, Diamond Bank Plc, Dr. Yerima Ngama, GMD, Mr. Emeka Onwuka, Divisional Head, Branch Banking, Dr. John Ayuba and Governor Ibrahim Shehu Shema of Katsina State during the visit of the executives of Diamond Bank to the Governor in his office
As at June this year, the Central Bank has sold $1.97 billion to banks through the WDAS forex sessions held twice a week. This rose to $2.75 billion representing 40 per cent increase in July. The monthly foreign exchange purchase by banks however rose by another 63 per cent to hit $1.276 in August, thus bringing the total sales to banks for the year to $4.026 billion.
This sharp increase, according to the Money Market Association of Nigeria (MMAN), in its monthly report for August was driven by "growing confidence in the economy, and relative stability in the polity, powering series of investment decisions by major entrepreneurs."
Further analysis of foreign exchange sales through WDAS in the first half of the year show that in the first quarter, it sold $515.1 million while it sold N1.462 billion in the second quarter.
Total foreign exchange sold in January was $369.4 million. In February, the amount sold fell by 82.4 per cent to $65 million while it shot up by 24.2 per cent to $80.7 million in March. In April, the foreign exchange sold rose slightly by 9.7 per cent to $88.5 million. In May, following the implementation of the 2008 appropriation bill, the foreign exchange sold soared by 571 per cent to $594.2 million and in June, it rose further by 31.25 per cent to $779.9 million.
It would be recalled that foreign exchange sold through WDAS constituted 67 per cent of foreign exchange utilization in the economy.
According to the first quarter report of the apex bank, "Foreign exchange inflow and outflow through the CBN in the first quarter of 2008 amounted to $12.89 billion and $4.19 billion, respectively, representing a net inflow of $8.7 billion.
Relative to the respective levels of $10.83 billion and $5.67 billion in the preceding quarter, inflow rose by 19.0 per cent, while the outflow fell by 26.1 per cent. The rise in inflow was attributed to the 30.9 per cent increase in autonomous inflow, reinforced by the 24.0 per cent rise in oil earnings, while the fall in outflow was attributed largely to 31.1, 55.9 and 64.7 per cent decline in DAS utilisation, drawing on letters of credit and autonomous outflows during the review quarter.
Available data on aggregate foreign exchange flows through the economy indicated that total inflow amounted to $29.02 billion, representing an increase of 25.3 and 85.7 per cent over the levels in the preceding quarter and corresponding period of 2007, respectively.
Oil sector receipts, which accounted for 36.8 per cent of the total, stood at $10.69 billion, compared with $8.62 billion and $6.81 billion in the preceding quarter and corresponding period of 2007, respectively.
Non-oil public sector inflows which accounted for 7.6 per cent of the total, fell by 0.6 per cent, while autonomous inflow which accounted for 55.6 per cent rose by 30.9 per cent.
At $4.50 billion, aggregate foreign exchange outflow from the economy fell by 31.3 and 37.2 per cent from the level in the preceding quarter and corresponding period of 2007, respectively. The decline in outflow relative to the preceding quarter was attributed largely to the 31.1 per cent fall in DAS utilisation, reinforced by the 64.7 per cent fall in autonomous outflows."
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