Key Points
- The Central Bank of Nigeria (CBN) sold $122.7 million to 46 authorised dealers to stabilise the foreign exchange market.
- The sale was conducted in two rounds: $67.5 million to 27 dealers and $55.17 million to 19 dealers.
- The exchange rates ranged from ₦1,480.0/US$ to ₦1,540.0/US$.
- The bank has been trying to stabilise the forex market for several months to reduce pressure on the naira and curb inflation.
- The International Monetary Fund (IMF) expects Nigeria’s economy to grow by 3.2% in 2024.
- The external reserves have been fluctuating, dropping to $32.11 billion in April but increasing by $2.94 billion in less than three months.
- The CBN plans to double diaspora remittance inflow through a stable flow of foreign exchange.
In a bid to stabilise the foreign exchange market, the CBN has decided to sell $122.7 million to 46 authorised dealers.
Dr Omolara Duke, the Director of Financial Markets, revealed that $67,500m out of the total sale was sold to 27 dealers, while the sum of US$2.5m was bought from one authorised dealer on the 10, 2024.
On that day, the ranges were about ₦1,480.0/US$- ₦1,500.0/US$, while the value date for the payments would be around July 12, 2024.
On July 11, 2024, the sum of $55,171m was also sold to 19 authorised dealers at ₦1,540.0/US$, with no FX purchased. The value date for this would be July 15, 2024.
The bank urged all dealers to guarantee that all FX purchases from the CBN were to be used solely for trade-backed transactions, which they would be reported in 72 hours.
The CBN’s efforts in stabilising the forex market have been ongoing for several months, as the bank strives to reduce the pressure on the naira and curb the rise in inflation. In addition to these regular auctions, the CBN introduced other measures, such as the old rule of restricting access to forex for certain imports and imposing fines on banks that fail to comply with its regulations.
Despite these efforts, the naira has continued to weaken, with the exchange rate in the market reaching as high as N1500 per dollar in recent weeks. This has led to concerns about the impact on the economy.
According to a report by the International Monetary Fund (IMF), Nigeria’s economy is expected to grow by 3.2% in 2024, but the country still faces significant challenges, including a large trade deficit and a high inflation rate.
The external reserves, another stabilisation method, have also been fluctuating, with about $35.09bn in reserves according to CBN data during the month of May. This was 14 days before the Foreign exchange (FX) unification policy was introduced in June 2023.
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However, after the announcement of the unification policy, the external reserves dropped to $34.66 billion. From July to December 2023, the reserves were fluctuating around the $33 billion range.
This year, on April 19, the reserves were at $32.11 billion, plunging from its previous data. The central bank Governor, Olayemi Cardoso, addressing the reason for the plunge blamed the decreasing reserves due to various debt repayments and other ideal financial obligations, as opposed to efforts to defend the naira.
The data by the apex bank also disclosed a surge in the exchange rate from the last few weeks ending in the month of June, with it reaching above $34 billion for the first time since April. The reserves have continued to grow in July, reaching the highest reserve in the last year.
Since its lowest level of $32.11 billion in April, the reserves have increased by $2.94 billion in less than three months.
The CBN also disclosed its plans to double the diaspora’s remittance inflow during the year through a stable flow of foreign exchange into the nation.
