Nigeria’s apex bank, the Central Bank of Nigeria (CBN) on Monday released a total of $210 million into the interbank foreign exchange market. Acting Director of COmmunications, Isaac Okorafor confirmed this in a chat with journalists.
How was the money allocated ?
Authorised dealers in the wholesale sector received $100 million. Small and Medium Enterprises (SMEs) received $55 million. The balance of $55 million will go towards meeting invisible transactions. These include school fees, medical bills, and Basic Travel Allowances (BTA).
Current FX reservesÂ
Nigeria’s gross reserves stood at $44.5 billion as at 16th of March according to information on the CBN website. This represents a $6 billion increase from the $38.6 billion the apex bank began the year with.Foreign reserves have been on an uptick due to the rebound in crude oil prices and improved production volumes.
The years 2016 and 2017 were marked by exchange rate volatility. The CBN was forced to implement supply management measures and devalue the country’s exchange rate. In addition, several items were banned from the official foreign exchange list.
The difficulties in accessing foreign exchange led to several firms shutting down production and multinational firms reaching out their parent companies for loans. This also led to a sharp increases in the cost of goods and services with a foreign exchange component.
The Naira is currently going for ₦305 at the official rate and ₦360 a dollar at the parallel market.
A release of $210 million is an equivalent reduction in the money supply by the same figure. If that holds true, what are the measures they have taken to offset the effects of a shortage in money supply due to forex release?