CBN defends Naira with $3.47bln in 3 months



“With injections totalling $3.47 billion between July and September by the Central Bank of Nigeria (CBN) the Naira was stabilised, preventing it from free fall for the period.”

Breakdown of the amount to foreign exchange dealers for the period according to Investigation by INSIDEBUSINESS ONLINE showed $727.5 million in July, increasing by 106 percent to $1.5 billion in August.

For the month of September, $1.24 billion was injected to absorb the shock on the Nigerian Currency.

Of this amount, the bulk of CBN disbursement totaling $561 million allocated to the clearance of the backlog of matured foreign exchange obligations for raw materials and machineries for manufacturing companies, agricultural chemicals, and airlines – was for Retail Secondary Market Intervention Sales (SMIS)

Also In August, $500 million went to settling wholesale foreign exchange dealers, $235 million to Small and Medium Enterprise (SMEs) and $200 million to invisible demands.

The breakdown comprises of $485 million to the Retail Secondary Market and $300 million to SMEs.  Others are $255 million and $200 million, invisibles, and wholesale segments, respectively.

Activities in the Investors & Exporters Foreign Exchange (I&E FX) window improved in September, with total turnover increasing by 14.61 per cent to $4.22 billion in September, from $3.68 billion in August.

Analyst had said, I & E FX window attracted a lot of foreign exchange from the offshore investors that purchased government bonds and Treasury-bills in September.

The CBN’s foreign exchange sales were intended to cover for personal and business travels, medical needs, and school fees, futures market and other approved transactions.

At the time CBN began massive funding of the foreign exchange market, the naira had lost significant value, trading at over N500/$1 at the parallel market.

Between July and September, the Naira against the Dollar has been hovering around $1/N360- N370

The Managing Director and Chief Executive of Financial Derivatives Company Limited, Mr. Bismarck Rewane told InsideBusiness that  CBN’s prompt intervention in the foreign exchange has continued to appreciate the local currency at the foreign exchange market.

He welcomed the recent CBN’s policies and stressed on sustained medicals, school fees and personal travel allowances intervention.

In his words, “If the CBN continue to increase supply in the foreign exchange market, the Naira will continue to appreciate. Once that stops, the Naira at the exchange rate will definitely depreciate.

“It is good CBN is intervention in the foreign exchange market but the question is that if CBN does not announce intervention in the next three days, what do you think is going to happen to Naira?

“Another question is that, why the sudden intervention by CBN?. CBN should have acted before now. Now that CBN has increased intervention in the medicals, school fees and personal travel allowances, it must be sustained.

“By doing so, the apex bank has bridge the gap between the interbank market rate and parallel market rate,” he explained.

He noted that the foreign exchange market is about sustainability and CBN must continue to address other issues for the nation to witness foreign stability.

Commenting also, the Managing Director, Cowry Asset Management Limited, Mr. Johnson Chukwu, praised the CBN for its foreign exchange decisive policies.

He noted that the recent CBN’s policies on foreign exchange has bridge the gap between official rate and parallel market rate.