The Central Bank of Nigeria (CBN) has injected CNY38.70 million and $289.76 million into the spot and short tenored forward segment of the interbank foreign exchange market, and the retail Secondary Market Intervention Sales (SMIS).
The Director, Corporate Communications Department at CBN, Isaac Okorafor, who confirmed this, said that the dollar-denominated interventions were for contracts in the agricultural and raw materials sectors.
He said, this exercise was for the payment of Renminbi-denominated Letters of Credit for agriculture and raw materials based proposals accepted from sanctioned dealers.
While restating the bank’s contribution to the inter-bank foreign exchange market, Okorafor said,
“The management of the CBN is pleased with the level of stability at both the Bureau de Change and the investors’ and exporters’ window of the foreign exchange market. The bank is also satisfied with the current implementation of the bilateral currency swap agreement with the Peoples Bank of China, coupled with a recent inflow of about $2.8 billion Eurobond.”
Around the second quarter of 2018, the apex bank also injected about $327.4 million into the inter-bank retail Secondary Market Intervention sales (SMIS), and this is just one of the past contributions of CBN to the SMIS.
Why do CBN keep intervening in the Foreign Exchange Market
Going by what Okorafor has said, there are more supports to be given by the CBN to help ensure the stability of the foreign exchange market.
According to Okorafor, CBN was ready to inject funds into the market whenever and wherever necessary, in order to maintain market stability as well as sustain the financial system.
The continuous contribution exists as a result of gains in the foreign exchange sector. So the more profit CBN make, the more they inject into the system, because it helps boosts up their gains.