The naira, Nigeria’s currency will stabilise if the Central Bank of Nigeria (CBN) sustains its dollars to authorised dealers at the official channel of the foreign exchange (FX) market, according to analysts.
On Friday, the CBN said it intervened in the foreign exchange market by selling the sum of US$122.67 million to 46 authorised dealers in its determination to promote stability and reduce market volatility in the market.
This has failed to shore-up the value of the local currency at the official and unofficial FX markets. The naira on Monday lost 0.86 percent as the dollar was quoted at N1,577.29 as against N1,563.80 quoted on Friday at the Nigerian Autonomous Foreign Exchange Market (NAFEM), data from the FMDQ Securities Exchange Limited indicated.
The dollar supplied by the willing buyers and willing sellers increased by 21.37 percent to $153.53 million on Monday from $126.50 million recorded on Friday. One of the traders told BusinessDay on Monday that there was strong demand for dollars by individuals who want to travel for the summer holidays.
At the parallel market, popularly called black market, the naira fell by N5 as the dollar traded at the rate of N1,565 on Monday from N1,560 on Friday.
According to the FX market summary released by the FMDQ in Monday, the intraday high printed at N1,590 per dollar as against N1,586 closed on Friday, while the intraday low closed at N1,470/$ on the same from N1,496.46 on Friday.
A statement signed by Omolara Duke, CBN’s director in charge of financial markets, disclosed that of the total sale, US$67,500,000.00 was sold to 27 authorised dealers, while the sum of US$2.5 million was bought from one authorised dealer on July 10, 2024.
“It is supposed to strengthen the naira. The naira stability is a function of demand and supply. In recent days, the naira seems to have come under pressure. This is likely to moderate the pressure,” Muda Yusuf, CEO of the Promotion of Private Enterprise, said.
He said what is important is the consistency and sustainability of it. “We need to generate that confidence in order to prevent people from speculating against the naira. The naira stability is very important. So, I think it is a good thing that they intervened,” Yusuf said.
Ayodele Akinwunmi, senior relationship manager, corporate banking group, FSDH Merchant Bank, said, the impact on the naira will be positive.
“We expect that it will enhance the value of the naira in subsequent weeks. Supply to the market should not be one-off. It will likely lead to sustained appreciation in the value of the naira,” he said.
According to the statement, The range of the bid for the July 10, 2024 sales was N1,480.0/US$-N1,500.0/US$, while the value date for the payments, going by the settlement cycle of two days (T+2), is July 12, 2024.
Similarly, on July 11, 2024, the sum of US$55.17 was sold to 19 authorised dealers at N1,540.0/US$, and no FX was purchased. The value date for the payments of the spot sale is July 15, 2024.
The statement, therefore, urged all authorised dealers to ensure that foreign exchange purchases from the CBN are used exclusively for trade-backed transactions, which should be reported within 72 hours.
While reiterating that the CBN supplies foreign exchange to the foreign exchange market to improve liquidity through FX spot sales to authorised dealers using two-way quotes, it assured that the Bank will continue to ensure stability in the FX market.