In its continued intervention in the foreign exchange market, the Central Bank of Nigeria (CBN) injected a cumulative sum of $2.04 billion to further sustain the improved liquidity and relative stability in the market.

According to the latest CBN’s monthly economic report covering the month of May 2019, Nigeria’s apex bank sold the whopping sum of $2.04 billion to authorised dealers in May, compared to $2.43 billion supplied in the previous month. This indicates a decline of 16.1%.

Key Numbers: A breakdown of the Central Bank’s intervention in the foreign exchange (FX) market in the month of May 2019 reveals that Interbank sales fell by 10% to $0.09 billion, to the level in the preceding month.

  • Currency sales to the Bureau De Change (BDC) rose by 6.3% and estimated at US$1.05 billion.
  • Swaps transactions remained unchanged from the previous month and it was estimated at $0.01 billion.
  • The average exchange rate of the naira to the US-dollar, at the inter-bank segment, was N306.95/US$, representing an appreciation of 0.003%
  • The average exchange rate at the BDC segment, at N360.00/US$, depreciated by 0.3% relative to the level at the end of the preceding month.
  • At the “Investors” and “Exporters” (I&E) window, the average exchange rate of the naira vis-à-vis the US dollar, was ₦360.74/US$ indicating that naira appreciated by 0.01%.
The Central Banks of Nigeria Governor, Godwin Emefiele

[Also Read: CBN blows $36 billion defending the naira in 2018]

Numbers Explained: The lower sales of FX in the month of May was as a result of less demand for FX at the inter-bank segment, a 6.3% decline. The reason for the decline may be as a result of low demand for forex at the interbank level, possibly due to the delays, policy, and other bureaucratic issues.

Unlike the interbank segment, demand for FX surged at the BDC segment. This means that the Central Bank had to increase its supply of forex to ease pressure on the Nigerian Naira. This reflected in the depreciation of the exchange rate on this segment, signifying a surge in the demand for FX for the month under review.

On the other hand, the fragility of Nigeria’s exchange rate system was further established as the Central Bank increased the supply of forex to the all-important I&E window where foreign investors trade. Accordingly, the naira exchange rate appreciated by 0.01% in the I&E segment in the month, indicating strong stability in the segments likely occasioned by an oversupply of FX by the Central Bank.

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[Also Read: CBN Governor blows hot regarding 41 banned items]

Meanwhile, Reserves Depleted by $48 million: While the CBN is bent on continuing its intervention in the FX market, burning through the reserves means the apex bank is sacrificing FX savings for naira stability.

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Analysis of data obtained from the Central Bank of Nigeria shows that in the last month, despite an increase in forex receipts, external reserves depleted by US$48.3 million. This shows that the Central Bank’s intervention is gradually eating up Nigeria’s external reserves. Here are highlights of Nigeria’s reserves in May 2019

  • The gross external reserves stood at US$44.85 billion, at end May 2019, indicating an increase of 0.9% above the US$44.47 billion recorded at end-April 2019
  • A breakdown of the external reserves by ownership showed that the share of Federation reserves was US$0.004 billion (0.01%)
  • Federal Government reserves were estimated at US$7.37 billion (16.4%)
  • Central Bank’s reserves stood at US$37.47 billion (83.6%) of the total
  • The increase was mainly due to rising receipts from foreign exchange purchases, receipts from oil-related taxes, receipts from joint venture companies (JVC cash call funding) and receipts from third parties
  • The external reserves position could cover 6.5 months of import cover for goods and services, and 10.4 months for goods only, using the import figure for the first quarter, 2019.

The Upshots: Despite the recent report that the Central Bank is heading towards floating the naira in order to allow market dynamics dictate the price of the naira exchange rate, the apex bank’s Governor, Mr Gowin Emefiele, the bank is committed to continuing its intervention policy in the FX market to stabilise the naira.

While the intervention will keep the naira stable, for now, analysts are of the opinion that it is only a matter of time before the CBN will float the naira in the face of rising tension in the middle east, and on-going trade war capable of crashing oil prices which is Nigeria’s main source of FOREX earnings.

[Also Read: CBN reacts to exchange rate policy change, says Naira not “floated”]


  1. Why use the term ‘blow’ when the currency was simply being exchanged for Naira? The term gives the impression that $2 Billion evaporated into thin air when in fact it still exists in the treasury as Naira.


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