CBN Injects $11.24bn into FX Market in Seven Months

By Adedapo Adesanya

The Central Bank of Nigeria (CBN) injected a sum of $11.24 billion into the foreign exchange (forex) market as part of efforts to stabilise the value of the Naira to the United States Dollar between January and July 2022.

In the apex bank’s monthly economic report on the FX market development, it was revealed that $7.6 billion was used to stabilise the local currency in the first five months of the year, while $3.64 million was pushed into the market in the next two months.

It stated that total foreign exchange sales to authorised dealers by the bank were $1.75 billion in July, a decrease of 15.4 per cent relative to $2.07 billion in June.

A breakdown shows that foreign exchange sales at the interbank/invisible window and matured swaps decreased by 22.0 per cent and 59.1 per cent, respectively, to $0.13 billion and $0.27 billion, below their respective levels in the preceding month.

The apex bank said FX sales at Investors and Exporters, Secondary Market Intervention Sales, and Small and Medium Enterprises windows rose by 5.8 per cent, 0.6 per cent and 65.7 per cent, respectively, to $0.44 billion, $0.72 billion, and $0.19 billion, compared to their levels in June.

The CBN said it had intervened in the markets with $1.65 billion, $1.39 billion, and $1.82 billion in January, February, and March, while the interventions were $1.56 billion and $1.18 billion in April and May, respectively.

This comes after a mission from the International Monetary Fund (IMF) recently urged the lender to limit its foreign exchange (forex) interventions in the currency market and allow commercial banks to fix the Naira to Dollar rates freely.

“In the medium term, the CBN should step back from its role as main FX intermediator, limiting interventions to smoothing market volatility and allowing banks to freely determine FX buy-sell rates,” it said.

The mission also reiterated its past recommendations to move towards a unified and market-clearing exchange rate by dismantling the various exchange rate windows at the CBN, accompanied by clarity on exchange rate policy and supportive fiscal and monetary policies.