Babajide Komolafe
5 January 2009
(WDAS) rose sharply by 26 per cent in 2008 even as the nation's currency Naira suffered 14.6 per cent depreciation on the average across the three segment of the market.
Analysis of WDAS report for 2008 show that foreign exchange purchased by banks rose from $9.33 billion in 2007 to $ 11.777 billion. Also the Naira depreciated by 12.9 per cent at the segment of the foreign exchange market while it depreciated by 12.4 per cent and 18.6 per cent at the official and Bureau De change (BDC) segment respectively.
Further analysis of the foreign exchange sales reveal that in the first quarter the total amount sold stood at $510.1 million. From $364.4 million in January it fell by 82 per cent to $65 million in February but rose by 24 per cent to $80.7 million March.
In the second quarter foreign exchange sold rose by 197 per cent to $1.519 billion. In April it rose by 9.7 per cent to $79.7 million, while it shot up by 571.4 per cent in may to $660.2 million. The increase in sales slowed down to $31.25 per cent in June to $779.9 million.
The increased activities in WDAS sessions were sustained in the third quarter hence total sales rose by 75.9 per cent to N2.673.4 billion. In July, sales rose by 41.8 per cent to $1.106 billion. It further rose by 15.4 per cent to $1.276 billion in August. It however slumped by 77.25 per cent in September to $290.3 million.
Foreign exchange sales peaked in the fourth quarter as total sales rose to an all time high of $7.068 billion representing 164 per cent increase over the previous quarter. In October it shot up by 1529 per cent to $3.365 billion in October. In November total sales dropped slightly by 8.8 per cent to $3.232 billion and further by 161 per cent in December to $470 million.
Investigations revealed that in addition to the global financial crisis other factors that shaped activities in the WDAS last year were foreign investors, budget implementation and new investments encouraged by political stability.
Activities n the first quarter of the year was largely influenced by huge stock of dollar brought in by foreign investors' occasioned low demand for official foreign exchange. Implementation of the 2008 appropriation bill in May as well as increased importation of goods resulted to increased demand in the second quarter.
The effected of these factors was complemented in the third quarter by new investment decisions by entrepreneur, powered by growing confidence in the economy and relative political stability hence further increase in demand in during the quarter.
But it was the global financial crisis that had the most profound impact on the WDAS during the year and this happened in the fourth quarter when offshore correspondent banks, seeking ways to reduce the effect of the credit crunch on the balance sheet, began to recall funds extended to their Nigerian counterparts as credit lines. This persisted through October and November prompting unprecedented huge demands and shattered the relative stability enjoyed by the Naira since the beginning of the year.
In fact analysis revealed that Naira exchange rate was stable in the three segment of the foreign exchange market until December when it suffered serious depreciation.
From January to November, the official exchange rate hovered around N116.5 and N116.8 per dollar, while the inter-bank rate ranged from N117.5 from N118.7. The BDC rate also remained relatively stable at N118 during this period.
The official exchange rate however rose to N131.27 per cent in December, from N116.81 per dollar in January. The inter-bank foreign exchange rate also rose to N133.03 per dollar from N117.76 per dollar in January, while the BDC exchange rate also rose to from N118 per dollar to N140 at the close of business in December. Consequently, the Naira lost N15.43, N14.46 and N22 at the inter-bank, official and BDC segments respectively during the year.
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