Barely two weeks after Nigeria’s apex bank, the Central Bank of Nigeria, CBN, recorded vast sales of the United States Dollar, it has again reportedly sold out $148 million to 29 authorized dealers, including banks and BDC operators.
According to the CBN, the move was aimed at stabilizing the country’s foreign exchange market. It also said earlier that the previous sales of $122.67m to 46 authorised were aimed at increasing liquidity in the country’s market stability and reducing volatility.
This is, however, coming at a time when the country’s currency (naira) recently witnessed a free fall against the dollar as it reportedly traded above N1,600 on Thursday at the official market.
This was also preceded by an announcement by the CBN that $20,000 was to be sold to each BDC at the rate of 1,450/$1, which was made a week ago.
In a statement, the CBN via a post on its website on Friday said the sales were made to the 29 authorized dealers on Monday, July 22 and Tuesday, July 23, 2024, between an exchange rate of 1,470.00/$1 and 1,510.00/$1 adding that all the sales recorded within the period amounted to a total sum of US S148,000,000.00 in the Nigerian Foreign Exchange Market.
The CBN also disclosed that it purchased $2m from one authorised dealer bank at the rate of 1,505.00/$ adding that “the value dates for all the transactions held on July 22, 2024, was T+0, while that of July 23, 2024, was T+0.”
In a related development, the recent surge in foreign liquidation and accompanying developments which indicate huge investments in the Nigerian forex market by the CBN, has raised concerns amongst experts over issues of further devaluation of the naira and how it could severely impact the nation’s already dwindling economy.
Media sources report that financial analysts have expressed worry, citing the detrimental nature of investing a whooping N311.41bn in the foreign exchange market in just the first half of the year as this has the potential to spur further devaluation of the naira and negatively impact on the Nigerian economy.
In a recent interview with journalists, Olaid Baanu, a financial analyst said that the sharp increase in foreign capital inflows to N229.07bn in the first half of the year, up from N72.02bn in the same period in the previous year was detrimental to the desired stability of the market.
According to Baanu, the increase was like a two-edged sword which on one side, indicates growth in interest from foreign investors and bolstering market confidence.
On the other hand, he explained that while the increased inflows are encouraging, foreign investors are still cashing out their profit due to high liquidation.
Similarly, the NGX recently published a report titled ‘Domestic & Foreign Portfolio Investment’ which indicates a N311.41bn worth of portfolio investments liquidated in the first half of the year compared with the N73.06bn in foreign outflows recorded in the same period in 2023.
Also recall that the CBN, through its Monetary Policy Committee recently increased the benchmark lending rate to 26.75 per cent.
CBN Governor, Olayemi Cardoso reportedly disclosed this at the end of the 296th MPC meeting in Abuja on Tuesday.
