Nigeria’s Central Bank Injects $250M To Sustain Liquidity In & Enhance Stability Of Forex Market

by Ike Obudulu Posted on August 29th, 2017

Abuja, Nigeria. August 29th. Nigeria’s Central Bank has again injected 250 million dollars into the Inter-Bank Foreign exchange Market, in a bid to sustain liquidity in  and enhance stability of the market. The Acting Director, Corporate Communications Department, Central Bank of Nigeria, CBN, Mr Isaac Okorafor, said the Apex Bank also sold 100 million dollars and shored up the Small and Medium Enterprises (SMEs) and invisible segments, with 85 million dollars and 65 million dollars respectively.

Okorafor said that the apex bank would pump even more liquidity into the market in the coming days, noting that the move by the CBN was necessary to enhance stability in the foreign exchange market.

He reiterated that in a bid to improve liquidity and ameliorate challenges encountered by critical stakeholders at this time of the year, the bank had ensured that pressures on the market from those seeking Forex for school fees and vacations were eased.

He said further that the bank had kept faith with its resolve to ensure that there is sustained liquidity to meet genuine requests for foreign exchange.

Meanwhile, the Naira has remained stable at the parallel market, exchanging at N367 to a dollar. The Nigerian currency maintained its Monday rate, while the Pound Sterling and the Euro traded at N478 and N433 respectively.

Trading at the Bureau De Change segment saw the Naira closing at N363 to the dollar, while the Pound Sterling and the Euro traded at N478 and N433, respectively.

The Naira appreciated at the investors’ window closing at N359.58, stronger than N361.13, its opening rate. Traders at the market expressed the hope that the Naira would remain stable in the days ahead.

The Naira made a comeback last week after demand forces caused it to depreciate for almost a week. Industry watchers believe that though a liquidity boost by the CBN was necessary to shore up the value of the Naira, efforts should be directed toward reviving the manufacturing sector.

The implementation of the Investors’ and Exporters’ Foreign Exchange (FX) Window continues to ensure relative stability in the foreign exchange market. Companies and individuals are now able to access more foreign exchange in the market than before to carry out eligible transactions and economic activities are gradually picking up.

The Central Bank of Nigeria (CBN) introduced the special window for investors, exporters and end-users of FX on April 21, 2017 as part of its efforts to deepen the FX market and accommodate all the FX obligations.

According to the CBN, the objective of the window is to increase liquidity in the FX market and ensure timely execution and settlement of eligible transactions. The eligible transactions in the window are: 1) Invisible transactions such as loan repayment, capital repatriation, management services fees, consultancy fees, software subscription, technology transfer agreements, personal home remittances and any other eligible invisible transactions. 2) Bills for Collection 3) Any other trade-related obligations (at the instance of the customers).

The CBN stipulates that the supply of foreign currency to the window shall be through portfolio investors, exporters, authorized dealers and other parties with foreign currency to exchange to Naira. The CBN is also a market participant in the window to promote liquidity and professional market conducts

Photo: Godwin Emefiele, CBN Governor

Nigeria aims to lure investors after publishing Nafex rate for foreign exchange transactions. The move has aligned inter-bank rate with black-market trades. For now, this is as close as it gets to a devaluation in Nigeria.

Nigeria took a step to unify its multiple exchange rates by allowing banks to use a currency window for investors when quoting the naira rather than the official rate. The naira weakened on the interbank market. The change was made because banks have been trading with each other mainly via the Nafex market since its introduction.

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