CBN Defends Naira, Sells Dollars to Banks 4 Times
The Central Bank of Nigeria (CBN) became aggressive in its forex market sales to authorised dealer banks to ensure enough liquidity in the currency market. FX market analysts who are familiar with the naira rate movement said, “You cannot imagine exchange rate direction without the CBN support that lasted for four days.”.
The authority sold about $198 million to authorised dealer banks to continue to boost FX liquidity and defend the naira to meet its year-end target. MarketForces Africa reported that the Apex Bank sold $124.6 million to dealers in the currency market in the previous week.
The renewed interest in FX auction started after it launched an electronic FX trading platform for banks early in December 2024. In the market, demand has been relatively heavy, necessitating the need to boost FX liquidity at the official window.
According to information obtained from traders, FX auctions to Nigerian banks started on Monday, and it happened all through to Thursday, MarketForces Africa gathered. At the beginning of trading session last week, the CBN intervened in the FX market, selling $30.5 million to banks between the rate of N1,520 and N1,547. Hence, the Naira gained N10 to close at N1,540.00.
On Tuesday, the CBN remained active in the FX market, selling $66.60 million to banks between the rates of N1,522 and₦1,544 per US dollar. A day after that, the CBN intervened yet again, selling $54.60 million between the rate of N1,531 and N1,547.00/$1, bringing the total FX sales for the week to $151.7 million.
The CBN intervened for the fourth consecutive session on Thursday, selling $46 million between the rates of N1,531 and N1,542, bringing total FX sales for the week to $197.7 million.
But the exchange rate failed to improve significantly. The naira still lost N2 to close at N1,540 at the official market on Friday. Latest data from the Central Bank of Nigeria showed that the gross external reserves balance increased to $40.761 billion.
FX liquidity is expected to remain suboptimal despite CBN’s FX intervention as inflows from autonomous sources remain weak. Barring any significant intervention from the CBN, the naira is likely to remain under pressure and could depreciate from its current level in the medium term, Cordros Capital Limited said in a note. #CBN Defends Naira, Sells Dollars to Banks 4 Times Naira Sinks, CBN Double Down Forex Market Interventions
