CBN Flood Nigerian Banks with $635m in Support for Naira
The Central Bank of Nigeria (CBN) squeezed out about $635 million to defend the local currency, the naira, from the onslaught of increasing demand for the US dollar in the currency market.
In what appears to be a deliberate yet aggressive move, the Apex Bank intervened in the official window throughout the week. The same pattern was observed in the prior week as a result of foreign investors selling down naira assets and associated demand for greenbacks for repatriation.
In March, the authority sold $714.65 million to banks to defend the naira, according to CardinalStone report, which estimated that at the current pace, the CBN can sustain dollar sales for 32 months with $23 billion in net FX reserves.
Data from the CBN showed that accretion into foreign reserves remained tight in the absence of FX inflows. But some analysts anticipate the next OMO bills auction will attract foreign investors as the authority is expected to raise spot rates. This week, Nigeria’s gross external reserves declined by $102 million to $38.03 billion in the absence of inflows from oil sales, remittances, and other foreign inflow sources.
Nigeria’s external buffers have benefitted from the policy reforms and associated increase in formalised FX transactions. The CBN recently announced that the nation’s net external reserves climbed to $23 billion in 2024, from $4 billion in 2023.
In a rating note, Fitch hinted about a lack of detail on the composition of reserves amid recent indications by the central bank that place net reserves at USD23 billion at the end of 2024, up from about USD4 billion at the end of 2023.
Fitch analysts estimate that roughly 14% of gross reserves comprise FX swaps with local banks, down from 25% in November 2024 assessment, amid increased efforts by the CBN to reduce FX liabilities.
On Friday, oil prices rose sharply, with Brent and West Texas Intermediate (WTI) crude gaining more than $1 following comments from U.S. Energy Secretary Chris Wright, who suggested that the U.S. might move to halt Iran’s oil exports in a bid to pressure the country over its nuclear ambitions.
Brent crude settled at $64.76 a barrel, up $1.43 or 2.26%, while WTI ended at $61.50, also gaining $1.43 or 2.38%. Meanwhile, gold soared past $3,200 an ounce as recession concerns mounted due to a deepening U.S.-China trade war and a weakening dollar.
Spot gold rose nearly 2% to $3,235.89 after hitting a record $3,245.28, with weekly gains exceeding 6%. #CBN Flood Banks with $635m in Support for Naira Intraday Rally – Equities Investors Stake Bets on UBA, Zenith, GTCO
