The Central Bank of Nigeria (CBN) has injected the sum of $1.47 billion into the Nigerian Foreign Exchange market in an effort to stabilize the naira and ensure liquidity in the market.
Recall that in the wake of the COVID-19 pandemic, oil prices crashed and this negatively impacted Government’s revenue and reserve, forcing the exchange rate to deteriorate over time across various windows, including the I&E and BDC. In a bid to defend the naira and ensure liquidity in the market, the Central Bank of Nigeria introduced a host of initiatives and policies to boost liquidity, including but not limited to direct intervention through capital injections.
In light of this, the apex bank through its January report on foreign exchange market development, noted that the latest injection declined by 64% when compared to the amount injected in similar period in 2020.
According to the recent CBN report, as captured by The Punch: “Total foreign exchange sales to authorized dealers by the bank was $1.47bn in January 2021, a decrease of 47.4 per cent and 64.0 per cent from the level in the preceding month and corresponding period of 2020, respectively.
“A disaggregation showed that foreign exchange sales at the I&E, SMIS, SME, and interbank fell by 79.9 per cent, 38.3 per cent, 19.8 per cent, and 37.3 per cent to $0.22bn, $0.48bn, $0.10bn, and $0.04bn respectively.
“Similarly, foreign exchange cash sales to BDC operators and matured swap transactions fell by 19.3 per cent and 48.7 per cent, compared with its level in the preceding month to $0.42bn and $0.12bn respectively in the review period.”
The report showed that external reserves declined from $36.6bn in December 2020 to $34.46bn in February 2021. Given the declining reserves and its resultant pressure on the exchange rate, the apex bank introduced policies like the Naira4dollar scheme which offers a rebate of N5 for every $1 remitted through IMTOs. On the other hand, just recently the apex bank added 10 more companies to the list of International Money Transfer Operators (IMTOs) licensed to operate in the country, thereby raising the total number of IMTOs to 57.