The
impact of the Investors’ and Exporters’ (I&E) FX Window, created by the Central Bank of Nigeria (CBN), on both
the FX market and stock market has been positive and magical, which
demonstrates how innovative financing ideas can generate energetic inflows into
the financial system and economy towards spurring growth.
Innovation,
the core of entrepreneurship, is one of the four major factors necessary for
economic growth and transformation; others being, infrastructure, education and
technology.
Economies
that fail to transform themselves will fall off the path of growth, as noted by
Peter Howitt. The Nigerian economy
fell off the path of growth in 2016. As a mono-product economy which has been
factor-driven for 57 years, the economy is more prone to shocks in a globalized
economy with changing perspectives.
The
Nigerian economy need to be diversified, with more innovative monetary and
fiscal policies, financial products, and a greater tilt to a market-based
financing system, in addition to other innovative ideas that could spring from
deep systems thinking and powered by technology to engender growth and rapid
transformation.
The
I&E Window was established in April 2017, ‘’to boost liquidity in the FX
market and ensure timely execution and settlement for eligible transactions as
stipulated by CBN. The operating modality is on a willing buyer, willing seller
basis. The exchange rates of the transactions are as agreed between Authourized
Dealers and their counterparties, which engender transparency and liquidity.
Eligible
transactions to access the Window are, Invisible Transactions (excluding
International Airlines Ticket Sales Remittances), Bills for Collection, and Any
other trade-related payment obligations (at the instance of the customer). The
Invisible Transactions include, capital repatriation, loan repayments, loan
interest payment, dividends/income remittances and consultancy fees.
Others
are software subscription fees, technology transfer agreement agreements,
personal home remittances and other such other eligible invisible transactions
including ‘Miscellaneous Payments’ as detailed under Memorandum of the CBN
Foreign Exchange Manual.
The
permitted Invisible Transactions and Bill for Collection are eligible to
purchase US Dollars sourced from CBN FX Window to Secondary Market Intervention
Sales(SMIS) Wholesale(Spot and Forwards) only.
In a
circular, dated April 25, 2017, CBN noted that, ‘’supply of foreign currency to
the Window shall be through portfolio investors, exporters, Authourized Dealers
and other parties with foreign currency to exchange Naira. The CBN shall also
be a market participant at this Window to promote liquidity and professional
market conduct.’’
Prior
to the establishment of the Window, the economy had cooled off and plunged into
recession in August 2016, when the National Bureau of Statistics (NBS) reported
that GDP dipped by 2.06 per cent for the second quarter in 2016. Recession is
characterised by business cycle contraction and general slowdown of economic
activities with drop in outputs, rising unemployment and more borrowing by
government.
Major
factors that contribute to the recession include a drastic fall in global oil
price, depletion of external reserves and flight of foreign investors. As a
result, dollar became scarce and many factories either shut down completely or
operated at suboptimal capacity. The development triggered a gale of downsizing
across subsectors of the economy, including banks. And, in turn, dollar
scarcity fuelled massive speculative trading on the green back, which
contributed to plunged Naira to an all time low of N590/$1.
The
establishment of I&E Window offered a panacea in the maze. In six months of
its establishment, between May and October, 2017, the Window, reportedly
attracted an inflow of $10 billion, and $20 billion to date. The Window
reenergized the FX Market and production and the PMI has since been looking up,
steadily.
CBN
has continued to sustain dollar supply on the back of increasing external
reserves which increased to $33 billion in October, 2017, from $23 billion in
October 2016, and is projected to hit $40 billion in 2018.
The
impact of the I&E Window also resonated at the stock market. In a typical
demonstration of its intrinsic nature as an information-driven market, the
stock market reacted positively and powerfully even ahead of the establishment
of the Window.
The
market, which, reportedly, had been bearish for five days became bullish on the
news of the pending establishment of the Window, and wiped off a seven day
trading loss with an additional traded value of N294 billion across all
sectors.
Stakeholders
have commended the positive impact of the Window on the economy. The Lagos
Chamber of Commerce (LCCI), in its Q3 review of the economy, noted that, ‘’CBN
has been consistent in its intervention in the FX market. This has helped to
reduce exchange rate volatility over the last two quarters.
With
the intervention, we have seen improved liquidity of forex and stability of
naira against the dollar. Confidence is gradually returning to the market and
we hope that this would be sustained.’’
And,
in a report released in October, 2017, the World Bank, noted that ‘’government
must sustain the regime of the free flow of foreign exchange into the economy
through the newly established Investors’ and Exporters’ Window, which has
helped to resolve the challenges of foreign exchange scarcity with flows into
the economy through the Window in excess of $7 billion.’’
The
economy exited recession in Q2, 2017, with a fragile growth of 0.55 per cent,
Year-on- Year in real terms, which is 2.04 per cent higher than the
corresponding quarter in 2016(-1.49 per cent). The World Bank noted that the
recovery was on the back of improving global conditions, including surging
capital flows and rising energy.
On the
outlook, the Bank projected that the Nigerian economy would grow at a modest
rate of one per cent in 2018, and South Africa by 1.5 per cent, against
Sub-Saharan Africa’s estimate of 3.2 per cent in 2018 and 3.5 per cent in 2019.
(Guardian)
Have you heard this? Many Nigerian exporters have been
defrauded of huge amount of money in the process of exporting commodities to
foreign countries. Do you know why? They were not trained on export operations,
management, documentations and the best methods of payment in export trade.
This is terrible!!! Nigerians cannot continue to lose money to foreigners in
the course of export business. Exporters, why don’t you get a practical manual
that teaches the stages of export trade from processing and packaging of commodities
to receipt of payment by the foreign buyers. It teaches export operations,
export management, export documentations and methods of payment in export
trade? It is a contemporary step-by-step guide to export trade. It tells all
the contemporary dynamics in export trade. To get it, click on the link below:
Hmmm!!! Folks, have you ever imagined how the
financial status of your firm will be when more than 20,000 CEOs and other key
decision makers of blue-chip corporations pay for your products and services or
even give you very juicy deals. The link below will tell you more: http://www.tectono-business.com/2015/07/tectono-business-review-in-conjunction_21.html
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