The Central Bank of Nigeria (CBN) has, on Tuesday July 17, 2018, injected the sum of $210 million into the inter-bank foreign exchange (forex) market.
The apex bank’s Acting Director of Corporate Communications Department, Mr. Isaac Okorafor, in a statement confirmed this. The figures restated the determination of the CBN to continue to intervene in the interbank foreign exchange market, and this is in line with its pledge to sustain liquidity in the market and maintain stability. He also stated that the continued forex intervention was to ensure that customer’s requests in various sections of the market are being met.
How was the money allocated?
The sum of $100 million was offered to cater for the requests of dealers who are authorised in the wholesale segment of the market, while the sum of $55 million was offered to cater to the needs of the Small and Medium Enterprises (SMEs), just as $55 million was also allocated for invisibles such as tuition fees, medical payments, Basic Travel allowance (BTA), etc.
Meanwhile, the Naira continued its stability in the foreign exchange market, exchanging at an average of N360 per dollar in the Bureau De Change (BDC) segment of the market.
What this means
By pumping $210 million into the inter-bank forex market by the CBN, the Apex bank will increase the supply of Dollars to meet its corresponding demand in the market so as to sustain the value of Naira to the Dollar.
It is important for the apex bank to increase liquidity in the inter-bank market to meet the demand for Dollars in the inter-bank window in order to forestall any likely shortages which might lead to a currency depreciation and a widening of the gap between the parallel and inter-bank forex markets.
In February 20 2016, the Central Bank of Nigeria issued a new forex policy on its website during the Forex crisis in the country. It was called the New Policy Actions in the Foreign Exchange Market.
CBN had introduced capital controls as a centre piece of its currency policy, this policy made the value of the Naira to plummet by over 38% at the black market as at the time the policy was made. The capital controls was introduced as a way to limit the access to forex and, therefore, direct utilisation of forex to sectors that it referred to as ‘preferred’.