The shrinking of the fx cake in numbers

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Wednesday, March 02, 2016 09:43 AM / FBNQuest Research

The governor of the CBN, Godwin Emefiele, noted in a press statement dated 11 January that its monthly earnings had fallen from about US$3.2bn to as low as US$1.0bn. Our chart shows flows through the CBN on a monthly basis through to November, with inflows on a downward trend that has since continued. (We take “earnings” to be synonymous with inflows).

The sharp decline in earnings highlighted by the governor mirrors that in the official share of receipts from oil exports calculated at US$110/b and then at US$35/b. We can see why access to fx has become problematic and why the CBN is returning up to N500bn (US$2.5bn) per week to the banks from unsuccessful bids.

The purpose of the statement of 11 January was to announce the end of fx sales by the CBN to the bureaux de change (BdC), which, it noted, had made it unique among central banks.

It called a halt to the sales because of perceived abuse by the BdC. This was also a measure to slow the depletion of reserves. The statement revealed that its weekly sales to the bureau had reached US$170m.

Abuse constitutes the largest single risk to the adoption of a second official fx window, which is said to have been under discussion by the monetary authorities. (Good Morning Nigeria, 23 February 2016). This risk, along with the CBN’s preference for a managed exchange-rate policy, suggests that a second window would not be a recognizable floating rate.

The spike in inflows in July is attributable to one-off receipts from the domiciliary accounts of ministries, departments and agencies with the CBN. 

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