International Rating agency, Fitch Ratings says Nigerian banks’ ability to access foreign currency has improved considerably since the Central Bank of Nigeria (CBN) introduced a foreign exchange “window” aimed at investors and exporters.

The scheme was introduced late in April.

A statement released by Fitch said, “The Nigerian Autonomous Foreign Exchange Rate Fixing (NAFEX) mechanism, commonly referred to as the “Investors’ and Exporters’ FX Window”, appears to be boosting FC supply and the flow of FC liquidity into the banking system.”

“Improved access to FC means that liquidity pressures have, for now, eased for Fitch-rated banks.”

Through much of 2016 and early 2017, Foreign Currency was in acute short supply, restricting imports and forcing several Nigerian banks to extend maturities on their trade finance obligations.

“FC NAFEX provides investors and exporters with a more transparent mechanism through which they can sell FC to willing buyers,” the Ratings agency said.

Authorised banks act as intermediaries, clearing funds supplied by portfolio investors and exporters and ensuring timely execution of settlement for buyers.

Despite its short record, volumes transacted through Nigerian Autonomous Foreign Exchange Rate Fixing are growing.

“In our opinion, NAFEX offers a more transparent alternative to accessing FC than is available through the other foreign-exchange markets in the country.”

Several exchange rates operate in Nigeria.

The CBN was the main supplier of Foreign Currency during the height of the forex crisis and it still sells Foreign Currency to the market through regular auctions, with banks acting as intermediaries.

The naira appreciated to as much as N362 per dollar at the parallel market — its best position in 2017, after opening at 490 in January.

On the official side of the market, the local currency traded at N304.55 to the greenback, maintaining its recent stability.

CBN usually sets alternative official rates at its Foreign Currency auctions and different rates apply for retail, wholesale, personal and small business purchasers.

Fitch said, “NAFEX introduces yet another exchange rate, which adds to the confusion, but its rates are set by market participants and this is already attracting greater volumes than other exchange mechanisms.”

“Access to Foreign Currency is essential to boost growth in the country’s highly import-dependent economy.”

“The ability of market participants to set their own rates under NAFEX is also forcing down exchange rates on the parallel markets. This is positive for the banks as it helps to draw funds back into the banking sector.”

“Over time, exchange rates may converge, but this will depend on a range of market and political considerations. “

It added, “The CBN can intervene on NAFEX, but we understand from our recent discussions with banks that CBN interventions have been limited. NAFEX rates have averaged about NGN380 to the US dollar recently and volumes are reaching about USD1 billion a week, according to these discussions.”

“While the improved FC access is credit positive for banks, the ratings of all the Nigerian banks remain constrained by our sovereign rating of ‘B+’/Negative.”