The Central Bank of Nigeria (CBN) spent nearly $16.56 billion to defend the naira in the last one year.
Analysis of the regulator’s half year report showed that the apex bank defended the local currency with $8.28 billion through its direct intervention within the first six months of 2019. Financial analysis estimated that the same level of intervention, or even higher amount applied in accompanying six months ended December 2019.
The amount was given to different segments of the inter-bank foreign exchange (forex) market, the report said, indicating that the forex sales were meant to manage the demand pressure and ensure exchange rate stability, which are within the core mandates of the apex bank.
As a result of the intervention, the naira has remained stable at both the official and parallel markets exchanging around N306/$ and N364/$ respectively.
The half-year report, signed by CBN’s Director, Financial Markets Department, Angela Sere-Ejembi, showed that $2.1 billion was auctioned at the Inter-bank spot, $550.70 million went to Invisible s, $810 million to Small and Medium Enterprises (SMEs), while $212.11 million and $4.57 billion went to Investors and Exporters (I&E) Forex window and Forwards sales respectively
She explained that the half-year report captured the bank’s monetary policy measures implemented by her department in the money, fixed income and forex markets.
Further analysis of the report showed that within the half-year ended June 2019, the CBN purchased $9.36 billion forex at the inter-bank segment, resulting in a net purchase of $1.08 billion. At the Forwards segment, $4.97 billion was matured, while $2.55 billion was outstanding.
The report showed that in the corresponding period of last year, $9.49 billion was sold at the Inter-bank segment, comprising $1.54 billion at the Inter-bank spot, $768.70 million for Invisibles, $637 million for SMEs, $1.23 billion at the I&E Forex window and $5.31 billion as Forwards sales.
The apex bank purchased $6.43 billion at the inter-bank segment, resulting in a net sale of $3.06 billion . The sum of $5.68 billion matured at the Forwards segment, while $1.46 billion was outstanding at end-June 2018.
“The increased sales at the inter-bank spot market in 2019 was attributable to the CBN’s foreign exchange management strategy of sustaining liquidity and maintaining exchange rate stability,” the report said.
The Naira-Settled Over the Counter Foreign Exchange Futures segment showed that of $8.03 billion that was traded in the futures market, $3.48 billion matured while $9.32 billion remained outstanding as at June this year.
This differed from the corresponding period of 2018 report, which showed that $3.96 billion was traded at the futures market, $2.91 billion matured, while $4.36 billion was outstanding.
Again, the daily exchange rate at the I&E Window opened at N364.41/$ in January 2019 and closed at N360.75/$ at end-June 2019, representing an appreciation of N3.66/$ while the monthly average exchange rate opened at N363.76/$ in January and closed at N360.64/$ in June 2019. “At the beginning of the year, the rates at the I&E window depreciated as a result of uncertainties around the 2019 general elections. However, it appreciated by N3.27/$ in March, and remained stable through end- June, 2019,” the report said.