The Central Bank of Nigeria (CBN) has continued to take major steps to keep the naira stable in line with its exchange rate stability objective. The apex bank has intensified interventions in the market, boosting FX supply to retail end users, reducing distortions in the market and maintaining effective foreign reserves management and accretions. Bamidele Ogunwusi, writes

The injection of liquidity into the market and rising compliance with FX regulations have reduced the sharp depreciation of the naira at official and parallel markets and buoyed foreign investors’ interest in the domestic economy.

The timely interventions of the Central Bank of Nigeria (CBN) through policy implementations and injection of liquidity into the forex market effectively halted the naira slide and restored stability in the forex market.

Aware of its exchange rate stability mandate, the apex bank recently injected $360 million through authorized dealers into the market, which helped to mitigate a steeper devaluation amid the resurgence of demand pressures.

The official FX rate exchanges at N1,530/$, while the local currency exchanges at N1,580/$ in the parallel market. CBN’s robust interventions — including last week’s selling of $360.00 million to authorized dealers have continued to help stabilize the naira.

The naira stability is also driven by inflows from Foreign Portfolio Investors (FPIs), substantial contributions from International Oil Companies (IOCs), and the CBN’s $18.40 million previous interventions to authorised dealers.

There is also renewed interest of Foreign Portfolio Investors (FPIs) in the FX market—driven by improved market confidence, a more efficient FX framework, and strengthening macroeconomic conditions.
Analysts at Cordros Research said the gross FX reserves increased by $12.06 million week-on-week to $38.36 billion after nine consecutive weeks of decline.

“Concerns about oil receipts underpinned by lower oil prices are likely to temper net FX inflows from Foreign Portfolio Investors, likely sustaining pressure on the naira. Nonetheless, CBN’s sustained market intervention and reduced market distortions are expected to prevent a sharp depreciation of the naira,” the report said.

Group CEO, Baobab Group, Philip Sigwart, said the Nigeria forex market has turned a corner, with stability allowing more companies to invest in the economy.

He disclosed that given the improved business confidence and stability in the forex market, his company will not only inject new capital into its operations but lend more to businesses.

Sigwart, based in Paris, at the Baobab Group headquarters, spoke during a media briefing in Lagos. He said the volatility in the forex market that made it difficult for businesses to plan and invest has been addressed and now is the time to invest and expand its operations in Nigeria to at least 100 branches, targeting an N1 trillion balance sheet.

Many other stakeholders have applauded the CBN’s reforms that kept the exchange rate stable and attracted a new wave of investment into the economy.

https://independent.ng/cbn-intensifies-efforts-to-stabilize-naira-bolster-foreign-reserves/