CBN Injects $14.2bn into FX Market in Nine Months

•  Dealers foresee stronger naira

Obinna Chima

The Central Bank of Nigeria (CBN) has injected a total of $14.184 billion into the interbank segment of the foreign exchange (FX) market since it started its forays in the market in February this year, figures compiled by THISDAY have shown.

This is just as the naira has been projected to appreciate against the U.S. dollar in the coming days following the anticipated inflow from the $3 billion Eurobond that was recently issued by the government as well as additional $2.5 billion borrowing plan that has been approved by the Senate to support the funding of the budget.

According to weekly FX sales by the central bank between February 21 and November 30, compiled by THISDAY, the CBN sold the greenback to authorised dealers in 60 sessions.

A breakdown of the dollar sales showed that $680 million was pumped into the market in February, $1.542 billion was sold in March, $1.616 billion in April, $2.102 billion in May, and $1.631 billion in June.

Also, while the central bank offered $1.639 billion to banks to sell to their customers in July, in August it sold a total of $1.051 billion.

Additionally, the central bank offered $1.548 billion in September, $1.567 billion in October, and $810 million in November.

The $2.102 billion sold by the central bank in May remained the highest in the nine months under review.
The dollar sales have been targeted at retail invisibles for PTA, BTA, school fees and medical bills, wholesale forwards, SMEs, and Secondary Market Intervention Sales (SMIS).

A market analyst said the interventions by the central bank have helped in eliminating the pressure on the forex market, ensured exchange rate stability and eliminated currency speculators.

The naira exchange rate has remained stable in the past few months, exchanging at around N360 to a dollar in almost all the FX market segments.

Besides the push by the CBN, analysts reckon that the influx of forex from Nigerians abroad, especially during the yuletide season, is expected to strengthen the naira as demand for the currency has been largely met by the banks and other dealers in the market.

The President of the Association of Bureau de Change Operators of Nigeria (ABCON), Alhaji Aminu Gwadabe praised the CBN’s drive to stabilise the forex market, saying that the measures stemmed rampant cases of forex leakages and illicit money transfer from the country.

He also assured the central bank of continuous support by his association.
Also, CBN spokesman, Mr. Isaac Okorafor, expressed optimism that the naira would firm up against other currencies in the weeks ahead considering the $3 billion inflow expected from the recent purchase of Eurobonds and the $2.5 billion borrowing approved by the Senate to support the funding of the budget.

According to him, the Bank’s resolve to ensure adequate supply of forex to genuine customers through authorised dealers was sure to guarantee liquidity and boost confidence in the market by checking the activities of speculators.

The aggressive interventions, notwithstanding, Nigeria’s external reserves increased by $5.488 billion to $34.816 billion as of November 29, compared to the $29.328 billion when the new forex policy was unveiled in February.
CBN governor, Mr. Godwin Emefiele recently projected that the external reserves would hit $40 billion before the end of 2018.

He also pointed out that the dogged implementation of the FX restriction on certain items had led to a 65 per cent drop in the country’s monthly import bill, from an average of $5.5 billion to $1.9 billion in the first half of 2017.

The governor expressed optimism that with the aggressive development finance interventions by the CBN, the nation’s import bill would reduce further.

This, according to him, would further strengthen the nation’s currency.
While stating that over the last 12 months Nigeria’s FX reserves had grown by over $11 billion, from about $23 billion in October 2016 to its present value, Emefiele said: “if we remain resolute with our efforts, policies and actions, we can attain FX reserves position of about US$40 billion by end 2018.”

He also expects a return to very low double digit or high single digit inflation levels next year but warned policymakers in the country not to become complacent or over-confident, stressing the need for all to continue to work to improve and sustain the pace of recovery.