Dollar injections into the economy estimated at $9 billion since February have helped the Central Bank of Nigeria (CBN) to achieve long-term naira stability and curb volatility in the foreign exchange (forex) market, The Nation has learnt.
The CBN has, in the last nine months, sustained its weekly dollar interventions in the forex market; a large part of it goes into the interbank market, bureau de change (BDCs), Retail Secondary Market Intervention Sales (SMIS) and wholesale spot.
The dollar injections were made to enable stakeholders secure enough forex for their operations, and in the process boost naira’s stability.
The gap between official and black market rates started to shrink since February 20, when the CBN resumed dollar interventions in key segments of the economy. Industry sources said the CBN has injected over $9 billion in the last nine months into the market.
The CBN’s Deputy Governor, Financial System Stability, Joseph Nnanna, said the introduction of the Investors’ & Exporters’ (I&E) Forex Window was targeted at increasing forex supply; and allowing the timely settlement of transactions helped to achieve the current exchange rate. He said over $10 billion has been attracted to the economy through the I&E Forex window, adding that the window’s success rate exceeded stakeholders’ expectations.
In line with its intervention policy, the CBN had, at the weekend, injected $287.89 million into the Retail Secondary Market Intervention Sales (SMIS).The intervention was in continuation of its resolve to guarantee liquidity in the foreign exchange market.
Data received from the CBN revealed that the figure was in favour of the agricultural, airlines, petroleum products and raw materials and machinery sectors.
The bank’s Acting Director, Corporate Communications Department, Isaac Okorafor, confirmed the figures, noting that the releases were targeted at sustaining liquidity in the market as well as boosting production and trade.
He reiterated that the bank remained committed to ensuring liquidity in the inter-bank sector of the market and would continue to intervene in order to drive growth in the economy and guarantee stability in the market.
With Friday’s rates hovering around N359 and N360/$1,. Okorafor, was upbeat that the bank’s forex intervention had effectively checked speculations around the Naira. He, however, disclosed that the bank would continue to ensure enforcement through utilisation report and market intelligence.
It will be recalled that the CBN had last Monday, also intervened in the inter-bank Foreign Exchange Market to the tune of $210 million comprising of $100 million for the wholesale segment and $55 million each for the Small and Medium Enterprises (SMEs) and invisibles segment.
Although the naira maintained its steady rate against major currencies around the globe, exchanging for N360/$1 in the BDC segment of the market on Friday, there is growing anticipation that the objective of the CBN to achieve rates convergence might be met before the end of December 2017 through a combination of factors such as Diaspora repatriation of funds and continued accretion to the country’s reserves.
Market sources said the naira’s stability will continue in the coming months due to the CBN’s increased dollar sale to BDCs, the intervention for SMEs and favorable forex policy for investors, exporters and end-users.
Also to boost naira’s position is the rising oil prices and production volume, which would translate to higher dollar earnings for the economy and improved foreign exchange reserves.
But JPMorgan Chase & Co. and Renaissance Capital have said the naira rally, sparked by increased sales of foreign-exchange forwards and looser capital controls, are contingent on the CBN continuing to sell down its foreign reserves.
