CBN FX Intervention Declines by 83% to $150m in April
The Central Bank of Nigeria (CBN)’s foreign-exchange market intervention dollar injections declined by 83%, putting significant pressure on the local currency.
As of the end of April, the naira exchange rate stood at N1,374.94, with total foreign exchange injections in the official market amounting to only $150 million.
This suggests the naira was relatively strong, supported by increased FX inflows and hot money from foreign portfolio investors. Forex market liquidity conditions were also bolstered by dollar supply from non-bank corporates, exporters and other sources.
The Apex Bank lubricated the Nigerian forex market by selling $895 million to banks to strengthen liquidity in the official FX market. This suggests that FX market intervention was 83% lower in April than in March. But successive FX outflows dragged down foreign reserves.
Reflecting huge foreign debt services, FX intervention and other related outflows, Nigeria’s gross external reserves declined to $48.367 billion from $49.238 billion at the beginning of April.
Crude oil prices sustained their upward momentum last week, underpinned by persistent geopolitical tensions around the Strait of Hormuz, where, despite Iran’s announcement of a restricted reopening and US claims of progress, effective blockades continue to disrupt flows and keep the market on edge.
Brent crude rose by 9.86% w/w to close at US$117.04/bbl after trading as high as US$118/bbl during the week, bringing its year-to-date return to 77.76% and reinforcing the sharp rally driven by supply uncertainty.
In contrast, Nigeria’s Bonny Light significantly outperformed, surging by 10.38% weekon week to US$134.86/bbl, its highest level since 2022, pushing its year-to-date gain to 112.65%, as tight Atlantic Basin supply and strong demand for light sweet crude continued to amplify price pressures.
Analysts said the ongoing diplomatic stalemate, Iran’s actions to discourage shipping passing through that is not coordinated with them, coupled with the US maintaining its effective blockade of Iranian ports, suggests a limited near-term resolution.
Meanwhile, the United Arab Emirates’ unexpected decision to exit OPEC, potentially to ramp up production outside quota constraints, has done little to calm markets, leaving prices elevated.
