The Central Bank of Nigeria (CBN) defended the naira with $8.28 billion through its direct intervention within the first six months of this year, according to its half year report. The amount was given to different segments of the inter-bank foreign exchange (forex) market, the report said.
The forex sales were meant to manage the demand pressure and ensure exchange rate stability, which are within the core mandates of the apex bank.
As a result of the intervention, the naira has remained stable at both the official and parallel markets exchanging around N306/$ and N364/$ respectively in the first half of the year.
The report, signed by CBN Director, Financial Markets Department, Angela Sere-Ejembi, showed that $2.1 billion was auctioned at the Inter-bank spot, $550.70 million went to Invisibles, $810 million for Small and Medium Enterprises (SMEs), $212.11 million at the Investors and Exporters (I&E) Forex window and $4.57 billion as Forwards sales.
She explained that the half-year report captured the bank’s monetary policy measures implemented by her department in the money, fixed income and forex markets.
Further analysis of the report showed that the CBN, within the half-year ended June 2019, purchased $9.36 billion forex at the inter-bank segment, resulting to a net purchase of $1.08 billion. At the Forwards segment, $4.97 billion was matured, while $2.55 billion was outstanding.
The report showed that in the corresponding period of last year, $9.49 billion was sold at the Inter-bank segment, comprising $1.54 billion at the Inter-bank spot, $768.70 million for Invisibles, $637 million for SMEs, $1.23 billion at the I&E Forex window and $5.31 billion as Forwards sales.
The apex bank purchased $6.43 billion at the inter-bank segment, resulting in a net sale of $3.06 billion . The sum of $5.68 billion matured at the Forwards segment, while $1.46 billion was outstanding at end-June 2018.
“The increased sales at the inter-bank spot market in 2019 were attributable to the CBN’s foreign exchange management strategy of sustaining liquidity and maintaining exchange rate stability,” the report said.
The Naira-Settled Over the Counter Foreign Exchange Futures segment showed that of $8.03 billion that was traded in the futures market, $3.48 billion matured while $9.32 billion remained outstanding as at June this year.
This differed from the corresponding period of 2018 report, which showed that $3.96 billion was traded at the futures market, $2.91 billion matured, while $4.36 billion was outstanding.
Again, the daily exchange rate at the I&E Window opened at N364.41/$ in January 2019 and closed at N360.75/$ at end-June 2019, representing an appreciation of N3.66/$ while the monthly average exchange rate opened at N363.76/$ in January and closed at N360.64/$ in June 2019. “At the beginning of the year, the rates at the I&E window depreciated as a result of uncertainties around the 2019 general elections. However, it appreciated by N3.27/$ in March, and remained stable through end- June, 2019,” the report said.
It added that the increased sale of foreign exchange by the CBN to the Bureaux De Change (BDCs) resumed in the second half of 2018, and was sustained in the first half of 2019 which increased supply in the retail market and helped to converge the rates in the BDC, I&E and Inter-bank segments.
This led to the daily BDC exchange rate that opened at N360.75/$ in January, closed at N360/$ at end-June 2019. The exchange rate was relatively stable, ranging from N359/$ to N362.75/$, between January and June 2019.