Data Shows CBN Defended Naira With Over $5 Billion in Six Months

• The CBN in the first six months sold over $5 billion to maintain naira stability in the foreign exchange market
• The apex bank intervention were carried out at the inter-bank Secondary Market Intervention Sales (SMIS) window
• The apex bank interventions have contributed to a decline in Nigeria's foreign reserves to $33 billion

In order to maintain stability in the exchange rate, the Central Bank of Nigeria (CBN) sold $5.78 billion of forex market in the first half of 2023.

This represents a 26.84 percent drop when compared to the $7.90 billion net sales recorded as at the end of June 2022.

CBN disclosed this in its half year financial market activity report released on its website on Tuesday, October 10, 2023.

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The sales by CBN to the FX market was aimed at moderating demand pressures and ensure exchange rate stability, BusinessDay reports.

Details of CBN FX activity

The breakdown of the CBN report reveals that a total of $6.44 billion was transacted in the foreign exchange market.

This sum consisted of spot and forward sales, accounting for $1.56 billion or 24.19 percent and $4.88 billion or 75.81 percent, respectively.

Among the spot sales, $612.41 million or 9.51 percent was allocated to the inter-bank Secondary Market Intervention Sales (SMIS) window, $455.31 million or 7.07 percent was designated for Small and Medium Enterprises (SMEs), $441.75 million or 6.86 percent was apportioned for invisibles, and $48.00 million or 0.75 percent was allocated to the Investor and Exporters (I&E) window.

Additionally, $5.68 billion matured in the forwards segment, leaving an outstanding balance of $7.54 billion at the end of June 2023.

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In the corresponding period of 2022, the total sales amounted to $9.23 billion, with spot and forward sales accounting for $4.39 billion or 47.57 percent and $4.84 billion or 52.43 percent, respectively.

The composition of spot sales in 2022 consisted of $2.08 billion or 47.28 percent at the I&E window, $834.74 million or 19.01 percent for SMEs, $622.92 million or 14.19 percent for SMIS, and $856.81 million or 19.52 percent for invisibles.

Furthermore, the Bank made purchases amounting to $1.32 billion during the review period, resulting in a net sale of $7.90 billion.

Naira sinks further against US dollar, worse in black markets

Meanwhile in another report, Legit.ng revealed that Nigerian currency continues its depreciation against the US dollar against the US Dollar in both the official and black market.

This happened due to a slight increase in the demand for dollars by individuals who want to travel either for business or tourism.

The CBN is expected to have its meeting next week and hopefully give a direction to forex market.

Source: Legit.ng