Nigeria: CBN Ramps Up FX Sales to Defend Naira Amid Market Pressures

The Central Bank of Nigeria (CBN) intensified its efforts to stabilize the naira by conducting aggressive forex interventions over four consecutive trading days. The move, aimed at bolstering liquidity in the foreign exchange market, saw the apex bank selling a total of $198 million to authorized dealer banks.

Strategic FX Intervention

Market analysts highlighted the importance of the CBN’s sustained support in influencing exchange rate trends. “You cannot imagine exchange rate direction without the CBN support that lasted for four days,” one analyst observed.

The intervention followed the launch of an electronic forex trading platform for banks earlier in December 2024, which marked a renewed focus on addressing heavy demand in the FX market.

Daily FX Sales Breakdown

• Monday: The CBN initiated the week’s intervention by selling $30.5 million to banks, with rates ranging from N1,520 to N1,547 per dollar. This move resulted in a modest gain for the naira, which appreciated by N10 to close at N1,540.
• Tuesday: Sales increased significantly, with $66.6 million sold at rates between N1,522 and N1,544 per dollar.
• Wednesday: The central bank intervened again, offloading $54.6 million at rates between N1,531 and N1,547 per dollar.
• Thursday: The final intervention of the week saw $46 million sold at rates between N1,531 and N1,542 per dollar, bringing the total weekly sales to $197.7 million.

Limited Impact on the Naira

Despite these interventions, the naira’s performance remained underwhelming. By Friday, the currency depreciated slightly, losing N2 to close at N1,540 at the official market.

External Reserves and Market Outlook

The CBN’s latest data indicated a marginal increase in gross external reserves, which now stand at $40.761 billion. However, concerns about FX liquidity persist, as inflows from autonomous sources remain weak.

Analysts at Cordros Capital Limited noted that barring further significant interventions from the CBN, the naira is likely to remain under pressure in the medium term, with a potential for further depreciation.

The CBN’s aggressive FX sales reflect its commitment to defending the naira amid persistent market challenges. However, with limited improvements in exchange rate stability and weak autonomous inflows, the road ahead for the naira remains uncertain.