Nigeria’s Central Bank Disburses $148m to Stabilize Foreign Exchange Market
The Central Bank of Nigeria (CBN) has taken a crucial step to stabilize the foreign exchange market by disbursing $148 million to 29 authorized dealers. This move comes amid the recent free fall of the naira, with the exchange rate fluctuating between 1,470.00/$1 and 1,510.00/$1.
According to a statement posted on the CBN’s website, the sales were made to the dealers on Monday, July 22, and Tuesday, July 23, 2024. The authorized dealers include banks and BDC operators, indicating a broad-based approach to address the foreign exchange market’s liquidity issues.
This development follows the CBN’s previous sale of $122.67 million to 46 authorized dealers, aimed at increasing liquidity and reducing volatility in the market. A week ago, the apex bank also announced that $20,000 would be sold to each BDC at the rate of 1,450/$1.
Despite these efforts, the naira has continued to depreciate against the US dollar, trading above N1,600 on Thursday at the official market. This has sparked concerns among financial analysts, who fear that the recent trend of high foreign liquidation in the Nigerian Exchange could destabilize the market and impact the economy.
According to a report by the Nigerian Exchange (NGX), N311.41 billion worth of portfolio investments were liquidated in the first half of the year, compared to N73.06 billion in the same period in 2023. This has led to fears of naira devaluation and its potential impact on the Nigerian economy.
A financial analyst, Olaid Baanu, highlighted the sharp increase in foreign capital inflows to N229.07 billion in the first half of the year, up from N72.02 billion in the same period in the previous year. While this initially indicated growing interest from foreign investors and bolstered market confidence, Baanu noted that the high liquidation indicates that foreign investors are cashing out their profits, which could destabilize the market.
The CBN’s move to inject $148 million into the foreign exchange market is a crucial step in addressing the liquidity issues and stabilizing the naira. However, it remains to be seen whether this effort will be sufficient to reverse the recent trend of foreign liquidation and restore confidence in the Nigerian economy.
