CBN Sells $1.3bn to Defend Naira, FX Reserves Hit 6-Month Low
To keep the exchange rate stable, the Central Bank of Nigeria (CBN) has sold a little less than $1.31 billion to defend the local currency in the foreign exchange market.
Steep FX volatility experienced in April triggered aggressive interventions in the official market. The monetary authority sought to achieve naira stability at the time foreign portfolio investors began to rotate out from the markets.
FX intervention sales to banks surged, up by 83% in April compared with $714.65 million sold to boost FX liquidity in the official window last month. The current year has seen more FX sales to banks targeted at strengthening forex market liquidity and giving the naira a sense of false exchange rate stability.
The heat in the forex market rose sharply due to a global trade policy shift, which triggered strong foreign portfolio investors’ massive exit in the last couple of months. FX outlook worsens due to weak crude oil prices, production constraints, and OPEC+ members plans to ramp up production at the time Nigeria is struggling to meet its quota.
In 2025, foreign reserves has dropped by more than $3 billion due to external debt service payments, aggressive intervention in the currency market, and lower remittances, settling at $37.811 billion on Friday.
On a positive note, the CBN announced Nigeria’s net FX reserves position grew to $23.30 billion in 2024 from $4.00 billion in 2023. Reflecting the latest conditions, activities in the Nigerian Foreign Exchange Market (NFEM) was marked by fluctuations driven by liquidity conditions and regulatory interventions.
The NFEM rate settled at N1599.54 on Friday as FX liquidity improved with inflows from oil and gas exporters, alongside consistent CBN interventions, from N1599.93 at the beginning of the trading session last week.
“The recent OMO auction shows the CBN’s readiness to use all monetary policy tools to maintain the naira’s stability within its current range,” AIICO Capital Limited said.
The CBN’s control over market supply will determine the currency’s direction. With reserves above $37 billion, the CBN is well-equipped to maintain currency stability, experts said.
“Although demand pressures in the FX market appear to have eased, we note that upside risks persist amid ongoing global uncertainties, which are likely to continue dampening capital inflows in the near term.
“As a result, FX liquidity is expected to remain suboptimal, potentially sustaining pressure on the naira and prompting continued interventions by the CBN to stabilize the currency”, Cordros Capital Limited said. Pension Fund Assets Grows to N23.366 Trillion
