The volume of dollars traded (turnover) in the Investors and Exporters (I&E) window of the Nigerian foreign exchange market fell by 10 percent, month-on-month, to $843.97 million last month from $937.27 million in July, 2020.
This represents the second consecutive decline after it fell 6.0 percent in July from $992.12 million in June.
This suggests a decline in dollar inflow from Foreign Portfolio Investors (FPIs).
Meanwhile the local currency appreciated by N2.33 kobo in August as the indicative exchange rate at the I&E window dropped to N385.67 per dollar on 31st of August from N388 per dollar on the 3rd of August
Analysts at FBNQuest Capital Research, a member of the First Bank Group, have projected further depreciation of the naira to N410 per dollar at the end of the year and N440 per dollar in 2021.
In their outlook for the third quarter of 2020, they said: “Our message is unchanged. Any move by the Central Bank of Nigeria (CBN) towards market-determined forexrates will be bumpy. Its preference, evident three times in the past quarter, is to deploy administrative measures when possible and make small forex adjustments in the absence of any alternative. The oil price recovery has given the CBN a little breathing space and external concessional loans will also help to shore up reserves as FPIs make and plan their exits.
“In our view, there has been little change in the CBN’s preferences. It had to act in the absence of an alternative, and the trigger was yet again a crashing oil price. Through to end 2021 we think that it will make small adjustments to contain the pressure, resorting to administrative measures. Multilateral loans and an oil price closer to $50 per barrel than $40 per barrel according to our conservative thinking should enable the CBN to muddle through. We see the I&E/NAFEX rate at N410 at end-2020 and N440 at end 2021.”