CBN $462M Boost Helps Stabilize Inter-Bank Foreign Exchange Market

by Ike Obudulu Last updated on August 26th, 2017,

The Central Bank of Nigeria on Friday sold another $462,336,426.74 to prop up the Naira value and improve consumer prices. This was after the apex bank intervened in the inter-bank market with $194 million on Monday.

Mr. Isaac Okorafor, the Acting Director in charge of Corporate Communications of the Central Bank, said the intervention was in line with the CBN commitment to deepen and sustain flexibility in the forex market.

According to the acting director, the apex bank allocated $267.336, 426.74 to the Secondary Market Intervention Sales (SMIS), while $100 million was offered to the wholesale segment.

Okorafor said $50 million was appropriated to the Small and Medium Enterprises, SMEs, while the segment that oversees those requiring foreign exchange for Business/Personal Travel Allowances, Medical fees, and Tuition fees got the remaining $45 million.

The Acting Director noted that the apex Bank would not relent in its efforts at sustaining stability in the inter-bank Forex market as well as ensuring the convergence between the exchange rates at the Nigeria Autonomous Foreign Exchange (NAFEX) and the Bureau de Change segments of the market.

Re-echoing the optimism of the CBN Governor, Godwin Emefiele, at the last Monetary Policy briefing on Tuesday, July 25, 2017, Mr. Okorafor expressed hope that the Bank’s intervention, coupled with complementary fiscal efforts, would restore the economy to the path of growth.
Meanwhile, the naira maintained its steady rate against major currencies around the globe, appreciating to N360/$1 in the BDC segment of the market on Friday, July 28, 2017. The Naira remained steady following the decision of the monetary policy committee to leave rates unchanged on Tuesday.

Economic Indices point to Nigeria slowly easing out of recession according a report by the Nigerian government on Tuesday.

Signs of economic recovery according to the report, include the fact that inflation, a major economic indicator has now fallen for the fifth successive month (February to June)

The Naira has also stabilised against the dollar; and the margin between the Interbank and parallel (aka black) market rates has narrowed considerably

The Nigerian Stock Exchange All Share Index (NSEASI) has seen dramatic gains in recent months (now about 20% higher than beginning of 2017 value). This surge is largely attributable to the new Investors and Exporters Window (NAFEX) introduced by the Central Bank in April.

Nigeria’s FX reserves have proved stable in recent months, even against a backdrop of continuing CBN intervention in the FX market

The new Investors and Exporters Window (NAFEX) has picked up momentum and powered a turnaround in investor sentiments related to the FX market. The Window has traded around $3.8 billion since it launched on April 24. (Roughly a third of this volume has been supplied by the Central Bank)

Nigeria’s Crude oil production has improved appreciably, coming in at 2.05 million barrels per day in June 2017. According to the NNPC’s May 2017 Operations Report, average daily gas supply to Nigeria’s power plants has risen by 64 per cent, compared to a year ago (May 2016).

On account of rising exports and falling imports, Q1 2017 was the second consecutive quarter of positive trade balance (i.e. exports greater than imports), after four quarters of negative balance.

Godwin Emefiele, CBN Governor

Central Bank data from June 2017 showed a rise in Purchasing Managers’ Index (PMI) – a measure of the health of the manufacturing economy – for the third consecutive month.

According to the National Bureau of Statistics, in Q1 2017 exports of Agricultural goods grew in value by 82% compared to Q4 2016. And Manufactured goods exports in Q1 2017 were 45% more than the value in Q4 2016.

Q1 2017 saw the fourth consecutive rise in exports since Q1 2016; amounting to a 109% increase year on year.

Between Economic indicators and Economic indices

Economic Indicator is a related term of Economic index. In context, the difference between Economic indicator and Economic index is that Economic indicator is a measure, such as unemployment rate, which can be used to predict economic trends while Economic index is a single number calculated from an array of prices or of quantities. An Economic indicator is therefore a pointer or Economic index that indicates something while Economic index is an alphabetical listing of items and their location.

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