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CBN Boosts FX Market With $12.22bn In 10 Months

…analyst commends bank’s interventions

There are indications that the Central Bank of Nigeria (CBN) may have injected about $12.22 billion into the inter-bank segment of the foreign exchange (Forex) market since February this year.

This has helped to ease pressure on Nigeria’s Forex market, which prior to the action by the regulator had been distorted and abused by speculators.

Experts believe that the estimated $12.22 billion injections into the economy since February have helped the apex bank to achieve sustained Naira stability and curb volatility in the foreign exchange (Forex) market.

The CBN has, in the last 10 months, sustained its weekly dollar interventions in the Forex market; a large quantum of which goes into the inter-bank market, bureau de change (BDCs), Retail Secondary Market Intervention Sales (SMIS) and wholesale spot.

The breakdown of the dollar sales showed that $680 million was pumped into the market in February, $1.542 billion was sold in March, $1.616 billion in April, $2.102 billion in May, and $1.631 billion in June.

Also, while the central bank offered $1.639 billion to banks to sell to their customers in July, as of August 21, it sold a total of $754 million. In September a total of $980 million was injected while, the apex bank has further injected more $1.660 billion into the Forex market between October and last month. Only last week, the apex bank injected $210 million into the market.

The $2.102 billion sold by the apex bank in May remains the highest in the 11 months under review.

In May, it sold dollars in eight different sessions in its bid to stabilise the market and discourage currency speculation.

The dollar sales were targeted at retail invisible for PTA, BTA, school fees and medical bills, wholesale forwards, SMEs, and Secondary Market Intervention Sales (SMIS).

The gap between official and black-market rates started to shrink since February 20, when the regulatory banking institution resumed dollar interventions in key segments of the economy. Industry sources said the CBN had injected over $12 billion in the last eleven months into the market.

The apex bank’s Deputy Governor, Financial System Stability, Joseph Nnanna, said the introduction of the Investors’ & Exporters’ (I&E) Forex window was targeted at increasing Forex supply; and allowing the timely settlement of transactions helped to achieve the current exchange rate.

He said over $10 billion had been attracted to the economy through the I&E forex window, adding that the window’s success rate exceeded stakeholders’ expectations.

In line with its intervention policy, the CBN had, at the weekend, injected $287.89 million into the Retail Secondary Market Intervention Sales (SMIS). The intervention was in continuation of its resolve to guarantee liquidity in the foreign exchange market.

Data received from the CBN revealed that the figure was in favour of the agricultural, airlines, petroleum products and raw materials and machinery sectors.

The bank’s Acting Director, Corporate Communications Department, Isaac Okorafor, confirmed the figures, noting that the releases were targeted at sustaining liquidity in the market as well as boosting production and trade.

He reiterated that the bank remained committed to ensuring liquidity in the inter-bank sector of the market and would continue to intervene in order to drive growth in the economy and guarantee stability in the market.

Okorafor, however, disclosed that the bank would continue to ensure enforcement through utilisation report and market intelligence.

Commenting on the apex bank’s forex management strategy, an Economist, Oluwasola Ayodeji, noted that “the CBN should be commended for the way it has continued to support genuine manufacturers, parents whose children are schooling abroad and other users of foreign exchange by supporting the market with foreign currencies.

“From what we have seen so far, the measures have frustrated Forex speculators, buoy up the Naira and helped to achieve one of the broad monetary policy thrusts of the government, that is monetary and fiscal system stability. This is a great achievement for which Governor Emefiele and his team should be lauded”, Ayodeji added

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