In demonstration of its commitment to support the proper functioning of the foreign exchange (FX) market by enhancing liquidity when necessary, the Central Bank of Nigeria (CBN) on Tuesday offered $876 million to fulfil bids submitted by customers during an auction trading.
The apex bank stated that the intervention in the FX market aligned with its pledge to provide transparent access to foreign exchange for all legitimate customers.
It clarified that the Tuesday’s offer was an additional mechanism through the Retail Dutch Auction System (RDAS) to directly facilitate FX sales to end users.
According to the management, this approach aims to foster a more transparent market, reducing information asymmetry and supporting price discovery.
In addition, is maintained that the intervention complemented the two-way quote system deployed over the past few months to enhance liquidity in the interbank market, through which over $305 million of foreign exchange has been sold to authorised dealers in the last three weeks.
Analysts believe that the CBN’s policy objectives are yielding tangible results and bolstering market confidence based on the benefits to the economy.
Available data on FX market showed that net foreign exchange inflows to the country rose to $25.4 billion between January and June this year, marking a 55% year-over-year increase.
This growth has been driven by a rise in capital importation, which reached $6 billion in June 2024, and record inflows from diaspora remittances through formal channels.
Similarly, the nation’s FX market is also showing signs of improvement and increased depth, with more robust and diversified sources of liquidity contributing to the sustained convergence of exchange rates across all segments of the market.
For instance, the official market recorded a turnover of $43 billion in customer transactions by the end of July 2024, with CBN-supplied liquidity representing less than 5% of total market activities.
The apex bank’s management assured that the bank remained steadfast in its commitment to fostering a transparent, market-driven foreign exchange market, and that it will continue to strengthen the market’s capacity to meet the needs of all legitimate participants.
