CBN Intervenes in FX Market, Injects $500m to Ease Supply Stress
The Central Bank of Nigeria (CBN) defended the naira by injecting $500 million, equivalent to N1,360.15 to N1,376, into banks amid rising demand for the US dollar in the official window.
Demand for western currencies rose sharply as foreign investors sold equity positions and adjusted their fixed-income instrument bets.
The local unit was largely bearish since last week as FX inflows from key sources into the Nigerian Foreign Exchange Market (NFEM) slowed, leaving supply thin.
The stock market was strongly bearish as the naira was sold off amid a surge in global bond yields. To close the foreign-currency liquidity shortfall during the trading session, Apex Bank sold FX to increase market supply.
The FX market opened the session strongly, supported by carryover demand from the previous trading day. Demand materially outstripped available supply, at one stage exceeding supply manyfold.
Foreign Portfolio Investor (FPI) inflows were limited, with some participants taking profits as the exchange rate peaked at N1395 during last week’s intraday trading session.
During Monday’s trading session, the CBN intervened, injecting $500 million to reduce the supply lag; nonetheless, demand remained elevated and continued to outpace supply despite the intervention.
Still, the naira fell versus the US dollar and other Western currencies, reflecting growing demand pressure often associated with seasonal imports and now pre-election demand.
The spot FX rate depreciated to N1367.6057 per US dollar, up from N1,361.8394 at Friday’s close, suggesting the demand-supply gap widened sharply. at the official window..
