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Forex dealers, FMDQ discuss trading procedures

by Business News Report

The Central Bank of Nigeria (CBN) will today meet banks’ treasurers to clarify issues relating to the operations of the flexible exchange rate regime.
A CBN disclosed this to Vanguard, saying, “We are going to meet with banks ‘treasurers in Lagos tomorrow to discuss operations of the new regimes. The meeting is to provide further explanations on how the new system will operate and also respond to questions and concerns over the guidelines released yesterday.”
Meanwhile, Vanguard investigations revealed that the Financial Market Dealers Quote (FMDQ) met with Chief Foreign Exchange Dealers and Foreign Exchange Dealers of banks yesterday.
A source with knowledge of the meeting told Vanguard on condition of anonymity that the meeting was to discuss parameters for interbank trading in the new foreign exchange regime commencing on Monday.
“The meeting was to agree on to determine the spread between the Offer and Bid rates as well as the standard volume of trade. The standard volume of trade is the volume of dollars, whether $100,000 or $200,000 banks will bid and offer to trade among each other. This will be determined by the total volume of dollars in the system. At the commencement of the new system on Monday, dollars in the system will be determined by how much the CBN sells to the Primary Foreign Exchange Dealers (PFEDs)”, the source explained to Vanguard.

Ecobank projects N280-N320/$ interbank rate
Meanwhile, analysts at Ecobank have projected that the naira will depreciate to between N280 to N320 per dollar in the interbank market in the short term.
In a comment on the new foreign exchange regime, they noted that, “
While the CBN did not announce any exchange rate, it is our opinion that a new exchange rate will emerge from the interbank exchange market, which will likely be above the current rate of $1:N197, at which the CBN has been selling dollars to banks. We think this rate is initially likely to be around $1:N285-320 as pent-up demand for Dollar is released onto the market.
Over time, the move is likely to increase the supply of US$ liquidity to the interbank market as remitters and exporters are likely to be more willing to sell dollars at the interbank rate.
Similarly, we believe that investors who have been sitting on the sidelines for fear of not being able to get dollar out of the economy will now be more willing to commit. Overall this greater flexibility will be positive for the economy as it will improve access to foreign exchange (albeit it at a higher rate) for firms which have been struggling to buy hard currency. The inflationary impact, we believe, will be fairly limited because many importers who were
accessing dollars were already doing so on the inefficient parallel market.”

Stock market continues rally with N206bn gain
The Nigeria stock market yesterday maintained its upward trend as total value of listed shares rose by N206 billion, indicating continued positive reaction by investors to adoption of flexible exchange rate policy by the central bank.
Economists and investment bankers had said that the market would continue to rally in the days ahead as local investors take position ahead of return of foreign portfolio investors.
The Nigerian Stock Exchange, NSE, benchmark indicator, the All Share Index, ASI, rose 2.2 per cent to 28,489.89 points from 27,891.96 points on Wednesday, while the second key performance indicator, the market capitalisation (or total value) of listed equities rose by further N206 billion to close at N9.78 trillion from N9.6 trillion the previous day, also representing 2.2 per cent increase.
The rally yesterday cut across all sectors in the market with the exception of AseM that fell by 0.2 per cent. The banking recorded the highest increase of 7.3 per cent to finish at 295.34 points on the back of gains on the shares of mid cap banking stocks like Unity Bank Plc and Wema Bank Plc, as well as 5.58 per cent gains on the shares of Zenith International Bank Plc.
The consumer goods sector followed, rallying 2.8 per cent as a result of appreciation on the shares of brewery gaint – Nigerian Breweries Plc and Champion Breweries Plc, while industrial sector rose 2.1 per cent to settle at 2,040.95 points. The NSE 30 Index was up 2.2 per cent to 1,265.73 points from 1,238.02 basis points.
The insurance sector recorded 1.6 per cent increase propelled by surge in Mansard, Custodian and Allied Insurance and Continental Reinsurance, which rose by five per cent, 4.86 per cent and 4.59 per cent in that order.
For every tow gainers in the day, there was a loser. Champion Breweries Plc led the advancers with 9.87 per cent increase to close at N3.34, followed by Unity Bank Plc with 8.33 per cent gains to close at N1.17. Lafarge WAPCO appreciated by 7.29 per cent to close at N74.01; Wema Bank rose 6.33 per cent to close at N0.84, while NB closed as the last on top five gainers table with 5.99 per cent increase to close at N141.76 per share.
Market breath also closed higher with volume traded stood at 618.25 million shares valued at N5.41 billion in 6,757 deals.

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