The Central Bank of Nigeria (CBN) has taken a significant step toward stabilizing the naira by selling approximately $90 million in the spot FX market on Tuesday. This marks the first time the CBN has sold dollars in the market since September 2023.
Sources familiar with the matter told NATIONAL ECONOMY that the CBN sold the dollars at a rate as low as N1490 per dollar, with more than half of the 34 banks that bid securing between $2-5 million.
The sale aims to enhance dollar liquidity in the market and revitalize one of the world’s worst-performing currencies this year.
The CBN had halted dollar sales in the spot market to address a backlog in foreign exchange demand, which was undermining investor confidence in the apex bank’s currency reforms.
The CBN’s intervention in the spot market was long-awaited, with the apex bank indicating its intention to intervene in the market periodically as far back as October 12, 2023.
“As market liquidity improves, these CBN interventions will gradually decrease,” the apex bank stated in a circular dated October 12.
However, the latest intervention by the CBN falls short of the daily average of $25 million it sold in the market last year.
“CBN being back in the market is highly commendable, as its presence will boost trading liquidity,” another source familiar with the matter said.
Analysts emphasize the need for the CBN to conduct sales professionally and consistently to maximize the benefits of its interventions.
“The next step is to establish a pattern for the sales, and then the exchange rate trajectory will begin to change,” one source said.
The naira gained ground on Tuesday to N1499/$, according to data by FMDQ Securities Exchange, up from Monday’s record-low of N1,534.39 per dollar.
The CBN’s intervention is part of a series of measures aimed at boosting liquidity in the FX market and preventing significant disparities between official and black market rates.
While the CBN has introduced better transparency around pricing in the official market and encouraged banks to offload excess dollars, it has been urged not to overlook fully clearing the backlog to restore investor confidence in the market.
Nigeria’s external reserves data has faced scrutiny, with the IMF projecting a record fall to $24 billion in 2024. Despite the CBN’s denial of reports questioning its reserves, concerns persist about the transparency and credibility of Nigeria’s reserve figures.