CBN Sells $10.3bn to Keep Naira at N379 at FX Market

February 18, 2021
Godwin Emefiele CBN Governor

By Adedapo Adesanya

A whopping $10.3 billion was used by the Central Bank of Nigeria (CBN) to defend the Naira at the foreign exchange (FX) market in the first half of 2020.

This information was contained in the H1 2020 Activity Report released on Wednesday.

According to the apex bank, this amount was sold to forex dealers at the various regulated segments of the market to keep the local currency stable against the Dollar in the period under review.

“Consequently, a total of $10,308.01 million was sold at the foreign exchange market. This comprised $5,056.55 million at the Investors & Exporters (I&E) window, $1,198.48 million at the inter-bank spot, $570.00 million for SMEs, $312 million for invisibles, while forwards sales were $3,170.97 million,” the report said.

Business Post reports that in the period, the local currency was relatively stable at N379/$1 at the interbank segment and N395/$1 at the investors and Bureaux De Change (BDC) segments of the market.

Within the period, the bank purchased a total of $2.2 billion, putting the net sale value at $8.1 billion.

“The sum of $5,425.3 million matured at the forward segment while $2,504.62 million was outstanding at end-June 2020,” it noted.

“In the corresponding period, a total of $8.5 billion was sold at the FX market. This comprised $2.2 billion sold at the inter-bank spot, $810 million at the SMEs, $550.7 million for invisible financing, $294.6 million sold at the investors’ & exporters’ window. Forwards sales took $4.7 million.

“In the first half of 2019, the bank purchased $$9.6 billion, putting the net balance at $1.08 million.

“In the futures market, the sum of $14,332.53 million was traded while $10,832.64 million matured and $13,167.65 million remained outstanding at end-June 2020,” the report also disclosed.

According to the report, the turnover of transactions at the I&E window amounted to $24.69 billion in the first six months of the year compared to $33.21 billion in the corresponding period of 2019.

“The decrease in turnover is a result of reduced inflows to the country. Since its introduction in April 2017, the turnover of transactions amounted to $173.41 billion at end-June 2020,” it noted.

The report further explained that in the first half of 2020, the foreign exchange market witnessed reduced foreign exchange inflows and increased demand pressures.

Providing an explanation, the apex bank said this was largely attributed to the drastic decline in crude oil price amid the coronavirus pandemic.

“In the first quarter of 2020, money market interest rates trended within the lower band of the MPR. This signified liquidity stability in the market, resulting mainly from the fiscal operations of the Federal Government, effects of the Loan to Deposit Ratio (LDR) policy, the Standing Deposit Facility (SDF) policy on placement limits on remunerable deposits, settlement for foreign exchange interventions, Open Market Operations (OMO) maturities and reduced frequency of auctions,” the apex bank noted.

Adedapo Adesanya

Adedapo Adesanya is a journalist, polymath, and connoisseur of everything art. When he is not writing, he has his nose buried in one of the many books or articles he has bookmarked or simply listening to good music with a bottle of beer or wine. He supports the greatest club in the world, Manchester United F.C.

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