In a bid to curb the volatility of the naira against the dollar, the Central Bank of Nigeria (CBN) has injected more than $300 million into Deposit Money Banks over the past fortnight.
This proactive move, disclosed in an advisory memo from the Association of Corporate Treasurers of Nigeria (ACTN), underscores the apex bank’s commitment to managing the fluctuating exchange rate of the naira.
The memo, circulated among ACTN members and obtained by The PUNCH, emphasizes the CBN’s intervention as part of a broader strategy to maintain liquidity in the foreign exchange market and bolster the naira amidst economic challenges. Financial analysts interpret this injection as a crucial step towards stabilizing the naira’s value, which has experienced notable fluctuations recently.
By supplying dollars to banks, the CBN aims to meet legitimate foreign exchange demands for various purposes such as business transactions, travel, medical needs, and education abroad. This action is intended to mitigate speculative activities that often contribute to currency devaluation.
According to excerpts from the memo, “The CBN last week sold over $200 million 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 $1,450 range.” The memo serves as a guide for decision-making regarding exchange rates and spreads provided by banks.
Confirming the development, an executive committee member of the ACTN, who requested anonymity, affirmed the accuracy of the memo’s contents, stating that the information originated from the CBN. The dissemination of the memo aimed to keep members informed amidst the significant depreciation of the naira.
The injection of dollars follows a period of rapid naira depreciation. Since the beginning of the year, the naira has faced challenges, starting at N891/$ on January 1, 2024. However, it has encountered downward pressure in both the official Nigeria Autonomous Foreign Exchange Market and parallel markets.
Nevertheless, there was a slight appreciation of the naira against the dollar at the parallel market last Thursday and Friday, following joint efforts by the CBN and the Economic and Financial Crimes Commission (EFCC) to crack down on currency traders in Abuja. The official market also witnessed a strengthening of the local currency.
At the close of trading activities on Monday, the naira appreciated to 1,582/$ at the official market, representing a N12 or 0.75 percent increase from Friday’s rate. Conversely, at the black market, the naira experienced a slight dip to between N1,555/dollar and N1,560/dollar, influenced by market sentiment.
While the naira reached its lowest point at 1,900/dollar last Thursday, it rebounded to 1,500/dollar on Friday following the EFCC raids on currency speculators. However, on Monday evening, the local currency depreciated slightly to N1,555/$ according to data from street traders.
The fluctuation in the naira’s value reflects market sentiment amidst ongoing EFCC crackdowns on black market operators in Abuja and Lagos.
