Friday, December 07, 2018 10:20 AM /FBNQuest Research
On Wednesday we commented on a quarterly data series for aggregate fx flows through the CBN, supplemented by figures for other (autonomous) channels. Today we turn to another series on the destination of the CBN’s fx supply.
The largest, surprisingly, is payment(s) on the maturity of forward fx contracts. The second largest is the CBN’s supply to NAFEX (investors’ and exporters’ window). As the sentiment of foreign portfolio investors has started to turn for reasons we have often given, so the CBN has become a seller (supplier) of fx at the window.
This data series highlights the point that the CBN, being wary of what we call free market forces, operates a complicated foreign-exchange regime.
The CBN’s swap transactions attract much commentary, sometimes of a conspiratorial nature, because they are not covered by the data for gross official reserves. This series, as one other in the CBN’s separate Quarterly Statistical Bulletin, provides some welcome colour. Many other central banks enter into swaps, and they do not all share the details in public fora.
The quarterly allocation to bureaux de change (BdC) is on a relative
scale that has few, if any parallels, in the EM universe. It has since been
increased by additional sales to the BdC for the Christmas season. The CBN’s
supply has varied greatly under different fx regimes, and it has previously
queried the rationale for an allocation to BdC per se.
Destination of fx
supply by the CBN, Q3 2018 (% shares) Total: US$11.88bn |
|
Sources: CBN; FBNQuest
Capital Research |
We see this data as providing a useful snapshot of transactions in Q3
2018. The series is subject to substantial revisions so we are not looking for
long-term trends. For example, the previous report showed total supply in Q2
2018 at US$6.40bn (now US$7.89bn), sales to BdC at US$270m (US$1.50bn) and
forward sales at maturity at US$2.92bn (US$3.24bn). We acknowledge that the
collection and reconciliation of this data is particularly challenging.
Related News
1. CBN Introduces Special Intervention Of FOREX Cash Sales To BDC Operators Effective Dec 6, 2018
2. Naira Succumbing To Speculative Pressures – N370 To A Dollar
3. Forex: Central Bank of Nigeria Injects $210m in Wholesale Segment, Others
4. Nigeria’s Central Bank Intervenes; Funds Forex Supply With $210m
5. Forex: CBN Injects $318.03m, CNY 62.18m Into Retail SMIS
6. Naira Under Increased Pressure In The Forex Market
7. Pressure on Reserves, Stability of FX Policy
8. CBN Injects Another $210m into Forex Market