Central Bank Reacts To Naira’s Positive Momentum With Key Decisions

In a proactive move aimed at stabilizing the Nigerian naira against the US dollar, the Central Bank of Nigeria (CBN) has infused more than $300 million into Deposit Money Banks over the past fortnight. This initiative, disclosed in an advisory memorandum by the Association of Corporate Treasurers of Nigeria (ACTN), underscores the CBN’s commitment to managing the fluctuating exchange rate of the naira……….CONTINUE READING

The memo, shared among ACTN members and accessed by The PUNCH, emphasizes the CBN’s intervention as part of a comprehensive strategy to ensure liquidity in the foreign exchange market and bolster the naira amidst economic challenges. Financial analysts regard this injection as a crucial measure to stabilize the value of the naira, which has witnessed notable volatility recently.

By supplying essential dollars to banks, the CBN aims to fulfill legitimate demands for foreign exchange related to business transactions, travel, medical needs, and education abroad. This approach is intended to mitigate speculative activities that often contribute to currency devaluation.

Quoting the memo, it stated, “We are sure you must have been following up on activities in the foreign exchange market, with rates at the official market going as high as N1850/$. If you are not aware, kindly note that the CBN last week sold over $200m to the banks below N1,500/dollar. Similarly, this week, the CBN has on two consecutive days sold FX to banks at rates we understand to be in the $1,450 range. We hope this information helps guide your decisions regarding the rates and spreads you get from your banks.”

An executive committee member of ACTN, confirming the development on the condition of anonymity, stated that the information in the memo was accurate and sourced directly from the CBN. The memo was disseminated to ACTN members to provide guidance amid the significant depreciation of the naira.

The dollar sales come in response to the rapid devaluation of the naira in recent weeks. Starting the year at N891/$ on January 1, 2024, the naira has faced multiple challenges at both the official Nigeria Autonomous Foreign Exchange Market and parallel markets.

While the naira appreciated against the US dollar at the parallel market following joint efforts by the CBN and the Economic and Financial Crimes Commission to crack down on currency traders in Abuja, it maintained stability at the official market. The naira closed trading at 1,582/$ on Monday at the official market, representing a 0.75% increase from the previous Friday.

In the parallel market, the naira experienced a slight dip to between N1,555/dollar and N1,560/dollar, influenced by market sentiment. After reaching a low of 1,900/dollar on Thursday, the local currency rebounded to 1,500/dollar on Friday, following the EFCC raids on currency speculators. However, it depreciated slightly to N1,555/$ on Monday evening, as reported by street traders.

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