CBN Intervenes in Fx Market: Sells $543.5Mn Amid Rising Demand
By Patience Ikpeme
In a strategic move to stabilize the Nigerian Foreign Exchange Market (NFEM), the Central Bank of Nigeria (CBN) has announced the sale of $543.5 million to Authorized Dealer banks from September 6 to September 30, 2024.
This significant intervention involved 11 dealing days and was executed through a two-way quote mechanism, indicating the central bank’s commitment to mitigating volatility and fostering a more balanced trading environment.
The recent FX spot sales were motivated by an observable surge in market demand, primarily attributed to heightened commodity importation needs and cyclical seasonal fluctuations for foreign exchange. These factors have intensified pressure on the naira, prompting the CBN to step in with liquidity support to ensure that market conditions remain stable.
All transactions associated with this sale bore a “T+2” value date, meaning that the settlement of all trades is scheduled to occur within two business days, allowing for timely reflection in the market. This quick turnaround is designed to keep the flow of foreign currency smooth and efficient, thus reassuring stakeholders in the national economy.
In a press release accompanying the announcement, the CBN emphasized its ongoing role in educating the public and guiding market participants on the pricing of foreign exchange. This proactive communication strategy aims to foster a better understanding of the market dynamics influenced by the recent sales, while also showcasing the range of rates at which the CBN has sold FX over the recent selling period.
The CBN has continuously advocated for a transparent and competitive market environment, reiterating that its involvement is pivotal in achieving a sustainable and accessible foreign exchange system. In light of the current global economic climate, characterized by significant shifts in commodity prices and exchange rates, the CBN’s role as a stabilizing force is more crucial than ever.
As Nigeria continues to navigate complexities in the global economy and manage domestic financial pressures, the CBN’s recent actions serve not only as immediate relief but also as a reaffirmation of its commitment to economic resilience and growth.
