Naira Gains, CBN Defends Local Currency with $5.78bn

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Naira Gains, CBN Defends Local Currency with $5.78bn

Naira Gains, CBN Defends Local Currency with $5.78bn

The Naira recorded a moderate daily gains on Tuesday as foreign exchange demand eased. The moderate rebound in the exchange rate was rather supported by declined demand while the market continued to battle with FX shortage.

According to data from FMDQ, The naira appreciated by 1.0% to N765.83 per US dollar at the investors’ and exporters’ foreign exchange market after hitting the roof in the recent past.

In a report released by the Central Bank of Nigeria (CBN), the apex bank revealed that it sold $5.78 billion to defend the naira in the first half of 2023. Analysts said this happened before the authority’s decision to float the local currency.

On the other hand, the apex bank purchased a total of $655.53 million in the market, the first half of the year financial market activity report released on the CBN website on Tuesday revealed.

However, the report showed that CBN’s net FX sales as part of its market intervention nosedived by 26.84 per cent from $7.90 billion at the end of June 2022. It was noted that spot transactions were lower compared with the corresponding period of 2022, while transactions in the forward market were marginally higher.

According to the report, a total of $6.44 billion was sold at the foreign exchange market comprising spot and forward sales in the sum of $1.56 billion or 24.19 per cent and $4.88 billion or 75.81 per cent, respectively.

The spot sales comprised $612.41 million or 9.51 per cent of total foreign exchange sold at the inter-bank Secondary Market Intervention Sales (SMIS) window, $455.31 million or 7.07 per cent for Small and Medium Enterprises (SMEs), $441.75 million or 6.86 per cent for Invisibles, and $48.00 million or 0.75 per cent at the Investor’ and Exporters’ (I&E) window.

To keep the naira healthy, the CBN played strong in intervening in the forex market in the first half of the year by selling US dollars to authorised dealers.

As a result of the devaluation of the local currency in June, the exchange rate which opened at N460 greenback on January 3, 2023, closed at N770.88/US$ on June 30, 2023, reflecting a depreciation of N310.88/US$ or 67.58 per cent.

On a monthly basis, the apex bank noted that the average exchange rate at N460.99/US$ in January, depreciated by 64.81 per cent to N610.71 in June 2023.

It said the significant depreciation was largely attributed to operational changes in the foreign exchange market, which led to the collapse of all segments into the Investors and Exporters (I&E) window and permitted all eligible transactions to access foreign exchange at market-determined exchange rate.

In 2022, the daily exchange rate opened at N417.00 on January 4, 2022, and closed at N414.00 at the end of June 30, 2022. On a monthly basis, the average exchange rate was N416.03 in January and N415.64 in June 2022, representing an appreciation of 0.09 per cent

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