FX Auction: CBN Sells $60 million to Nigerian Banks at N1,540
The Central Bank of Nigeria (CBN) sold $60 million to the authorised dealer deposit money banks at the rare FX auction conducted last week to stop exchange rate from crossing the red line.
The Nigerian FX market saw improved dollar liquidity in the interbank NAFEM market amidst lingering US dollar shortage and rising demand for foreign currency.
The central bank intervened once, selling around $60 million at ₦1,540, AIICO Capital Limited said in a note to investors.
Data from the FMDQ platform confirmed that volume of US dollar in the supply side increased. The surge stemmed forex supply as exchange rate has already crossed N1,660 in the official market.
Overall, the naira appreciated by 2.47% week-on-week, closing at ₦1,600.78 in the NAFEM window after banks released N92.4 billion to buy $60 million from CBN.
On policy side, the CBN appears to have dumped its re-introduced retail Dutch Auction System aimed to remove excessive intermediation in the forex sales to end users. Unfortunately, demand which printed at $1.1 billion at the first Dutch auction call overwhelmed the authority.
“FX sales of that magnitude can crash the external reserves”, a Broadstreet financial expert told MarketForces Africa, adding that the CBN may not be opened to continue with such huge bids.
Post Dutch FX auction sales in August, the authority’s US dollar sales to authorised dealer banks have been minimal, with CBN selling $544 million to banks in Sept. In Oct, FX sales to banks has been on decline. In the past week, the CBN has sold $110 million to boost liquidity level in the foreign currency market. #FX Auction: CBN Sells $60 million to Nigerian Banks at N1,540
