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On Tuesday (October 10, 2023), the Naira saw modest daily gains as foreign exchange demand eased. The uptick in the exchange rate was driven by reduced demand, even as the market continued to grapple with a shortage of foreign exchange.
According to data from FMDQ, the Naira appreciated by 1.0%, reaching N765.83 per US dollar at the investors’ and exporters’ foreign exchange market, following a period of recent volatility.
In a report released by the Central Bank of Nigeria (CBN), the apex bank disclosed that it had sold $5.78 billion to support the Naira in the first half of 2023. Analysts noted that this occurred before the authority’s decision to let the local currency’s value float.
Conversely, the central bank purchased a total of $655.53 million in the market, according to the first-half financial market activity report published on the CBN website on Tuesday.
However, the report revealed that CBN’s net foreign exchange sales as part of its market intervention decreased by 26.84% from $7.90 billion at the end of June 2022. It was observed that spot transactions were lower compared to the corresponding period in 2022, while transactions in the forward market showed a slight increase.
The report detailed that a total of $6.44 billion was sold in the foreign exchange market, comprising spot and forward sales, with sums of $1.56 billion (24.19%) and $4.88 billion (75.81%), respectively.
The spot sales included $612.41 million (9.51% of the total) at the inter-bank Secondary Market Intervention Sales (SMIS) window, $455.31 million (7.07%) for Small and Medium Enterprises (SMEs), $441.75 million (6.86%) for invisibles, and $48.00 million (0.75%) at the Investor’ and Exporters’ (I&E) window.
In a bid to stabilize the Naira, the CBN actively intervened in the foreign exchange market in the first half of the year by supplying US dollars to authorized dealers.
As a consequence of the local currency’s devaluation in June, the exchange rate, which opened at N460 to the US dollar on January 3, 2023, closed at N770.88/US$ on June 30, 2023, reflecting a depreciation of N310.88 or 67.58%. On a monthly basis, the average exchange rate declined from N460.99 in January to N610.71 in June 2023, according to the central bank.
This significant depreciation was largely attributed to operational changes in the foreign exchange market, which led to the consolidation of all segments into the Investors and Exporters (I&E) window and allowed all eligible transactions to access foreign exchange at a market-determined exchange rate.
In contrast, the daily exchange rate in 2022 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 appreciated marginally, from N416.03 in January to N415.64 in June 2022, reflecting a 0.09% appreciation.
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