New Year report released by analysts at FBNQuest Capital Limited has indicated that seamless access to forex which started from third quarter of 2017 will among other things grow activities in the nation’s manufacturing and other import dependent sectors this year.
According to the report, the trend started since last year and will create strong from for inflow of Foreign Direct Investments (FDI) this year, 2018.
Key discovery of the report showed that Nigeria’s Purchasing Managers’ Index for the manufacturing sector grossed strongly in December to 68.7 from 60.1.
The PMIs are forward-looking indicators of sentiment in all economies and have the proven capacity to move financial markets in developed economies.
Analysts at FBNQuest added that findings showed that employment, new orders, suppliers’ delivery times and stocks of purchases which had improved on the previous month, were unchanged, or had declined.
While revealing that a headline reading of 50 was classified as neutral, the document averred that “All five sub-indices rose in December. The highest was 73 (stocks of purchases). The headline reading has been above 50 since March. The principal driver has been the CBN’s use of multiple FX windows, which has transformed liquidity.
“Manufacturers, or indeed any users of FX, now have reliable access to FX provided that they are comfortable with the price. This is evident from the PMIs but also inflation data and listed companies’ results. This positive impact has gained momentum since July. Weekly turnover on the investors’ and exporters’ FX windows has risen to about $1bn.
Continuing, the report noted that “A more recent boost in both October and December has been the seasonal rise in demand for the year-end celebrations. The readings in December have been particularly strong although we should caution that a similar surge the previous year was followed by a sharp fall in January 2017.”
Additional facts showed also that there had been a general transformation in access to forex since the first quarter of 2017 due to the Central Bank of Nigeria’s opening of several forex windows.
“In contrast, forex is now widely available. Local substitution has also removed some forex demand. Its impact remains small, and the agro-processing segment seems to be the main practitioner,” the FBNQuest Capital Limited report summed.