CBN Takes Decision As Naira Gains

In an aggressive move to stabilize the naira against the dollar, the Central Bank of Nigeria (CBN) has injected over $300 million into Deposit Money Banks within the past two weeks.

This development, revealed in an advisory memo from the Association of Corporate Treasurers of Nigeria (ACTN), underscores the apex bank’s efforts to manage the naira’s fluctuating exchange rate.

The memo, which has been circulated among ACTN members and seen by The PUNCH, highlights the CBN’s intervention as part of a broader strategy to ensure liquidity in the foreign exchange market and support the naira amidst economic pressures.

Financial analysts view this injection as a critical step towards stabilizing the naira’s value, which has experienced significant volatility in recent times.

By providing the much-needed dollar supply to banks, the CBN aims to meet legitimate foreign exchange demands for business transactions, travel, medical needs, and education abroad, thereby reducing speculative activities that often lead to currency devaluation.

The memo read in part, “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 ₦1,500/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.”

Confirming the development to the platform, an executive committee member of the ACTN, who pleaded anonymity, said the memo was sent to ACTN members to help guide in decision-making amid the dramatic fall in the value of the naira.

He said, “Everything in the memo is correct. The information is from the CBN. We just wanted to keep our members informed on what is happening.”

The dollar sales came on the heels of rapid depreciation of the naira in recent weeks. As of January 1, 2024, the naira began the year at N891/$, but has since taken multiple beatings at the official Nigeria Autonomous Foreign Exchange Market and parallel markets.

However, the local currency appreciated against the United States dollar at the parallel market last Thursday and Friday after the CBN in collaboration with the Economic and Financial Crimes Commission raided currency traders on the streets of Abuja.

The currency traders were believed to be speculating against the local currency. The local currency also firmed up at the official market.

Meanwhile, the naira appreciated against the dollar to 1,582/$ at the close of trading activities at the official market on Monday.

According to data obtained from FMDQ securities, the increase was N12 or 0.75 per cent from ₦1,594 recorded at NAFEM on Friday.

At the black market, the naira slipped slightly to between ₦1,555/dollar and ₦1,560/dollar, following market sentiment.

The local currency, which peaked at a lowest of 1,900/dollar on Thursday rebounded to 1,500/dollar on Friday, following EFCC raids on currency speculators.

However, the local currency depreciated slightly against the dollar at ₦1,555/$ on Monday evening, according to data collated from some street traders.

The rise in naira value was due to market sentiment as the EFCC continued to clamp down on black market operators across Abuja and Lagos.