By Dipo Olowookere

The continuous increase in demand for the greenback by foreign portfolio investors (FPIs) weakened the local currency at the foreign exchange (forex) market last week.

It was observed that the Naira did not perform well at the various market segments despite the intervention of the Central Bank of Nigeria (CBN) by providing the sum of $210 million to authorised dealers at the interbank market last Tuesday.

The apex bank had supplied the sum of $100 million to the Wholesale segment, while $55 million were each given to dealers at the Small and Medium Scale Enterprises and the invisibles to cater for BTA, medicals, school fees and others.

But at the close of the week on Friday, the local currency depreciated at the interbank forex market to N361.34 to the Dollar.

Also, the local currency went down by 0.07 percent week-on-week (w-o-w) against the Dollar at the Investors & Exporters Forex Window (I&E FXW) to quote at N363.92/$.

However, the local currency remained unchanged against the Dollar at both the Bureau De Change (BDC) segment and the parallel market at N358/$ and N361/$ respectively.

Meanwhile, according to analysts at Cowry Asset, most dated foreign exchange rate forward contracts at the interbank over-the-counter (OTC) segment rose amid declining external reserves: 1-month, 2-month, 6-month and 1-year contracts lost 0.15 percent, 0.11 percent, 0.08 percent and 1.04 percent to close N367.14/$, N370.44/$, N384.59/$ and N414.47/$ respectively.

Business Post reports that the Africa’s largest economy’s foreign reserves depreciated by 0.99 percent w-o-w to $44.381 billion as at Thursday, September 27, 2018, according to data harvested from the website of the CBN.

https://www.businesspost.ng/2018/09/30/naira-weakens-on-more-demand-for-dollar-declining-reserves/

Dipoilowo . Whose fault is this?

The exit of foreign portfolio investors from our market is majorly because of the political situations in Nigeria as well as the hike of rate by Fed Reserve to 2.25% few days ago.

Now, ask yourself that as an investor, would you want to leave your money in Nigeria with what happened in Osun few days ago? No investor wants to risk losing his money for anything.

So, as foreign investors pull out their funds, they will first have to convert their Naira proceeds to Dollar, resulting into more demand for Dollar and more pressure on Naira, causing the local currency to weaken.

I hope I have answered you.

4601CE:
Dipoilowo . Whose fault is this?

dipoolowoo:
The exit of foreign portfolio investors from our market is majorly because of the political situations in Nigeria as well as the hike of rate by Fed Reserve to 2.25% few days ago.

Now, ask yourself that as an investor, would you want to leave your money in Nigeria with what happened in Osun few days ago? No investor wants to risk losing his money for anything.

So, as foreign investors pull out their funds, they will first have to convert their Naira proceeds to Dollar, resulting into more demand for Dollar and more pressure on Naira, causing the local currency to weaken.

I hope I have answered you.

Okay. Thanks .
Someone said the withdrawal of foreign investors from Nigeria stock exchange will make millions of people lose their jobs .
I said that’s a lie ! But he started to rant with no single explanation to back up his claim .
Please kindly say something about this.

I guess your friend or the person is mixing up foreign portfolio investors (FPIs) with foreign direct investors (FDI).

The withdrawal of funds by FPIs does not cause job loss, but FDIs.

FPIs are investors who only invested in stocks by going through stockbrokers in the country, while FDIs have physical investments in the country. So, when FDIs pull out their funds, it means they are selling their investments like companies, assets and others for cash. And like you know, if an investor sells his company, it means those working there will surely lose their jobs.

So, FPIs are different from FDIs. I hope my explanation helps.

4601CE:

Okay. Thanks .
Someone said the withdrawal of foreign investors from Nigeria stock exchange will make millions of people lose their jobs .
I said that’s a lie ! But he started to rant with no single explanation to back up his claim .
Please kindly say something about this.

what about the yuan deal lmaoo.. Buhari is Fraud

The Yuan deal is still on.

globemoney:
what about the yuan deal lmaoo.. Buhari is Fraud

dipoolowoo:
I guess your friend or the person is mixing up foreign portfolio investors (FPIs) with foreign direct investors (FDI).

The withdrawal of funds by FPIs does not cause job loss, but FDIs.

FPIs are investors who only invested in stocks by going through stockbrokers in the country, while FDIs have physical investments in the country. So, when FDIs pull out their funds, it means they are selling their investments like companies, assets and others for cash. And like you know, if an investor sells his company, it means those working there will surely lose their jobs.

So, FPIs are different from FDIs. I hope my explanation helps.

Thank you very much for this explanation!

You are welcome

4601CE:

Thank you very much for this explanation!