Despite the Central Bank of Nigeria’s (CBN) efforts to stabilize the naira by injecting $122.67 million into the foreign exchange market, the local currency continues to face pressure. The CBN’s intervention, aimed at promoting market stability, has not prevented the naira from depreciating against the dollar in both official and parallel markets.
creased Dollar Supply
On Friday, the CBN announced the sale of $122.67 million to 46 authorized dealers. This intervention was intended to reduce volatility and promote stability in the foreign exchange market. However, this move did not have the desired effect, as the naira continued to lose value.
Market Reactions
On Monday, the naira depreciated by 0.86 percent, with the dollar quoted at N1,577.29 compared to N1,563.80 on Friday at the Nigerian Autonomous Foreign Exchange Market (NAFEM), according to data from the FMDQ Securities Exchange Limited. The dollar supply from willing buyers and sellers increased by 21.37 percent to $153.53 million on Monday, up from $126.50 million recorded on Friday. Despite this increased supply, the demand for dollars remains high, particularly from individuals planning to travel for summer holidays.
In the parallel market, the naira fell by N5, trading at N1,565 per dollar on Monday, down from N1,560 on Friday. The FMDQ market summary for Monday showed an intraday high of N1,590 per dollar and an intraday low of N1,470 per dollar, reflecting significant volatility.
Analysts’ Perspectives
Experts believe that the CBN’s interventions need to be more consistent to effectively stabilize the naira. Muda Yusuf, CEO of the Promotion of Private Enterprise, emphasized the importance of sustained and consistent dollar supply to build confidence and prevent speculation against the naira. “The naira stability is very important. So, I think it is a good thing that they intervened,” Yusuf stated.
Ayodele Akinwunmi, Senior Relationship Manager at FSDH Merchant Bank, echoed this sentiment, suggesting that continuous supply of dollars to the market would likely enhance the value of the naira over time. “We expect that it will enhance the value of the naira in subsequent weeks. Supply to the market should not be one-off,” Akinwunmi noted.
CBN’s Commitment to Stability
The CBN has reiterated its commitment to improving liquidity and ensuring stability in the foreign exchange market through regular spot sales to authorized dealers. The bank urged all dealers to use the foreign exchange exclusively for trade-backed transactions and report these transactions within 72 hours to maintain transparency and accountability.
Bottom Line
While the CBN’s recent dollar sales aim to stabilize the naira, the currency continues to experience significant pressure. Experts argue that a more sustained and consistent approach is needed to build market confidence and achieve long-term stability. The coming weeks will be critical in determining whether these interventions can effectively bolster the naira’s value.
