Foreign Exchange (FOREX) market gets $956 million boost from CBN

Godwin Emefiele
Godwin Emefiele

The Central Bank of Nigeria (CBN) last month expended over $956 million to defend the nation’s currency, the Naira, at the various segments of the foreign exchange (forex) markets.

This is in addition to more than 63 million Chinese Yuan (CNY) released for the Renminbi-denominated Letters of Credit (LoC) for businessmen plying their trade along the Chinese corridor. The figure was arrived at based on the weekly amount released by the apex bank in its forex report.

The month kicked off with the injection of $294.7 million and CNY31.4 million into the Retail

Secondary Market Intervention Sales (SMIS) segment of the market on June 7. It was followed by the $210 million intervention on June 11, 2019.

A breakdown of the figure shows that authorised dealers in the wholesale segment of the market were offered $100 million, while the Small and Medium Enterprises (SMEs) segment received the sum of $55 million. The sum of $55 million was allocated to customers requiring foreign exchange for invisibles such as tuition fees, medical payments and Basic Travel Allowance (BTA), among others.

On Tuesday, June 25, the apex bank again offered authorised dealers in the wholesale segment $100 million, while the Small and Medium Enterprises (SMEs) and the invisibles segments each received the sum of $55 million.

Three days later, on June 28, this bank of last resort, in continuation of its intervention in the inter-bank forex market injected the sum of $242.04 million into the retail Secondary Market Intervention Sales (SMIS) and CNY 32.3 million in the spot and short tenored forwards segment of the inter-bank forex market.

Its Director of Corporate Communications Department, Isaac Okorafor, disclosed that the intervention was for requests in the agricultural and raw materials sectors, adding that the Chinese Yuan, on the other hand, was for Renminbi-denominated LoC.

Okorafor expressed satisfaction over the stability of the foreign exchange which, according to him, was largely due to sustained intervention by the CBN. He gave assurance that the apex bank would remain committed to ensuring that all the sectors of the forex market continue to enjoy access to the needed foreign exchange.

He added that with improved inflow of forex, the exchange rate had remained stable around N360/$1 for the past 27 months.

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Investigation revealed that between April 2018 and last March, CBN injected over $42.3 billion into the forex market to ensure liquidity in its various segments.

An analysis of the intervention showed that the apex bank injected about $7.89 billion into the market in the second quarter of 2018. This rose to $11.88 billion in the third quarter.

However, the figure dropped to $10.72 billion in the fourth quarter before rising to $11.81 billion at the end of the first quarter of 2019.

During this period, CBN sustained its interventions at both the inter-bank and the Bureau De Change (BDC) segments. However, the average exchange rate of the Naira to the dollar at the inter-bank segment depreciated by 0.04 per cent to N306. 84 to a dollar in the first quarter, compared to the level at the end of 2018.

Commenting on the impact of the interventions in stabilising the forex market, Okorafor attributed the relative stability in the market largely to the continued liquidity injection of the apex bank.

The CBN mouthpiece then assured the public that the apex bank remained committed to ensuring that all the sectors continued to enjoy access to the forex required for the business concerns, whether in United States dollars or Chinese Yuan.

He said the apex bank would continue to come up with measures that would ensure the value of the Naira appreciates in the forex market.

He stated: “The Importers and Exporters (I&E) window was formed basically to sustain that market. We also have international money transfer operators. They also bring money that we also allowed to reflect market realities and that is another autonomous source.

“The currency swap has helped to stabilise the market. Because these are the demand that would have found itself in the dollar segment of the market.

“So we have been able to remove that and that also has helped to maintain stability.”

He said the apex bank would continue to sustain its intervention in the forex market until availability of enough liquidity in the market

He added that the apex bank would continue to sustain its intervention until enough liquidity in the market.

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