CBN Sells $300 Million to Deposit Money Banks to Stabilise the Naira

In the recent happenings in stabilising the Naira, the Central Bank of Nigeria has reportedly sold over $300 million to Deposit Money Banks in the last two weeks as ongoing measures to strengthen the naira versus dollar exchange rate tussle that has continued to plummet the prices of things in the country.

However, this announcement was disclosed by the Association of Corporate Treasures of Nigeria in an advisory memo distributed to its members and some distributed to some news outlets nationwide. 

The memo partly reads,

• We are sure you must have been following up on activities in the foreign exchange market, with rates at the official market going as high as N1850/$.

• If you are not aware, kindly note that the CBN sold over $200m to the banks below N1,500/dollar last week. Similarly, this week, the CBN has sold FX to banks on two consecutive days at rates we understand to be in the $1,450 range. This information helps guide your decisions regarding the rates and spreads you get from your banks.

However, an executive committee member of the ACTN disclosed to the PUNCH that the memo released to its members was to help guide decision-making following the upswings witnessed in the value of the naira.

"Everything in the memo is correct. The information is from the CBN. We just wanted to keep our members informed on what is happening," he said.

The naira has been raising concerns ever since the past administration, but it worsened this year as it traded on January 1, 2024, at N891/$. It didn't stop there, as it continued to fall at the official Nigeria Autonomous Foreign Exchange Market and the parallel market, also known as the black market.

However, the country's currency made some changes last week as it appreciated against the USD on Thursday and Friday following reforms from the Central Bank of Nigeria (CBN) alongside the Economic and Financial Crimes Commission (EFCC), which raided traders selling illegally on the streets of Abuja. It was believed that currency traders were amongst those speculating the naira. If not for the quick intervention, the naira would be clocking N2,500/$ this week.

The naira appreciated against the dollar as it sold for 1,582/$ at the end of trading activities at the official market on Monday, February 26, 2024.

Cross-examining the data from the FMDQ securities, the increase was N12.00 or 0.75%, from the N1,594 recorded at NAFEM on Friday.

According to market sentiment, the naira declined little on the black market as it traded for N1,555/$ and N1,560/$.

However, according to data collated from some street traders, the local currency depreciated slightly against the dollar at N1,555/$ on Monday evening.

The rise in the value of naira was due to market sentiment as the EFCC continued to clamp down on black market operators across Abuja and Lagos.

It was reported last week that the EFCC made arrests of over 250 BDC operators at the famous Wuse Zone 4 market. 

The move has had a profound effect on the activities of major IMTOs, including Western Union and MoneyGram, and is among several measures aimed at stabilising the foreign exchange market.

Last Wednesday, the CBN, in a circular addressed to all banks, cancelled cash payments for Personal and Business travel.

To promote transparency and accountability in the forex market, the CBN directed all banks to process the allowances through electronic channels.

The CBN urged all authorised dealers and the public to promptly adhere to the new directive to facilitate a seamless transition to electronic payouts.