CBN Defended Naira with $10.3b In Six Months

The Central Bank of Nigeria (CBN) defended the naira in six months with $10.3 billion intervention in the inter-bank foreign exchange market, its half-year report has shown.

The naira dipped to N429.75/$1 on the Investors’ & Exporters’ window at last week’s trading sessions, depreciation from around $410/$1 it exchanged previously.

Although the local currency has remained stable at the official CBN rate of N379/$1, it exchange at N482/$1 at the parallel market on Friday. The local currency’s depreciation at I&E window has howler continued to narrow rate gaps.

According to the report signed by CBN Deputy Governor, Economic Policy, Kingsley Obiora, the apex bank’s intervention in the inter-bank foreign exchange market was to cushion demand pressures and ensure exchange rate stability.

The Financial Markets Half-year Activity Report is a presentation of activities undertaken by the Department to implement the bank’s monetary policy measures. It details the span of activities in the money, fixed income and foreign exchange markets to support the policies of the apex bank.

In the first half of last year, the CBN said the dollar sales breakdown comprised $5.05 billion sold at the Investors’ & Exporters window; $1.19 billion  at the inter-bank spot; $570 million for Small and Medium Enterprises (SMEs); $312 million for invisibles, while forwards sales were $3.17 billion.

The CBN purchased a total of $2.2 billion, which resulted in a net sale of $8.09 billion. The sum of $5.42 billion  matured at the forwards segment, while $2.5 billion was outstanding.

In comparison with the first half of 2019, a total of $8.47 billion was sold at the foreign exchange market.

This comprised $2.16 billion at the inter-bank spot, $810.00 million for SMEs, $550.70 million for invisibles, $294.59 million at the I & E window, while forwards sales were $4.65 billion.

The CBN purchased $9.55 billion, which resulted in a net sale of $1.08 billion.

According to the report, $4.97 billion matured at the forwards segment, while $2.55 billion was outstanding at end-June 2019.

Obiora said the spread of the novel coronavirus disease (COVID-19) continues to undermine economic and social activities across the world, with many countries recording negative output growth.

He said Nigeria has not escaped some of the negative consequences of the COVID-19. He said despite headwinds, the economy performed better than expected in the first quarter of the year. Although downside risks abound, his  outlook for the economy was more optimistic than most analysts seem to portray.

“I believe that in the middle of this pandemic, lies great opportunities to support growth, and there cannot be a better time to make a big push, particularly given our wide negative output gap and rising inflation,” he said.