The Central Bank of Nigeria (CBN) has given International Oil Companies (IOCs) the green light to resume the sale of US dollars to banks, a move aimed at injecting liquidity into the Investors & Exporters (I&E) foreign exchange market. This development comes as a source familiar with the matter confirmed that the restriction previously imposed on IOCs from selling dollars to dealing member banks has been lifted.
The decision to allow IOCs to sell dollars is expected to enhance liquidity in the Investors & Exporters window and help address the existing backlog of US dollar demand in the market. Acting CBN Governor, Folashodun Shonubi, has been reversing policies implemented by the suspended Governor, Godwin Emefiele, since assuming office in May. Shonubi has been actively working towards implementing a comprehensive overhaul of the country’s monetary policies, as promised by President Bola Tinubu.
The CBN’s focus has shifted to increasing the supply of dollars in order to alleviate pressure on the naira, which experienced a sharp depreciation of over 60 percent following the floatation of the currency and the end of the hard currency peg. These long-overdue reforms had initially caused a drain on the economy and concerns among investors. However, the recent move to boost dollar supply aims to stabilize the currency.
As a result of this development, the naira gained 1.2 percent at the I&E window. Furthermore, the total forex turnover increased by 20 percent, with trades amounting to $89.37 million, compared to $73.86 million recorded on the previous trading day.
The decision to allow IOCs to sell dollars is a significant step in increasing liquidity in the forex market and addressing the backlog of US dollar demand. It is part of the ongoing efforts by the CBN to stabilize the naira and create a more favorable environment for investors. As the CBN continues to implement reforms and boost dollar supply, market participants will closely monitor the impact on the forex market and the overall economic stability in Nigeria.
