Godwin-emefiele - - Monetary Policy: CBN set to unfold 2019 plans

Data from the Central Bank of Nigeria reveals the country’s apex bank purchased a whopping sum of $4.19 billion in the month of March 2019. The information was contained in the Central Bank’s quarterly statistics bulletin.

Double down: The CBN occasionally plays in the forex market by either being a buyer or seller of last resort. However, it has played an increasing role on the buy side ratcheting up its purchases in the billions.

  • The data reveals the CBN purchased a combined $6.7 billion in the first quarter of 2019 alone. This compares to $4.8 billion in the first quarter of 2018.
  • In 2018 the CBN purchased $8.7 billion from the WDAS and RDAS market.
  • To put this into better perspective, a combined $6.6 billion was purchased by the Apex bank between 2016 and 2017.

What this means: Since the introduction of the Importer and Exporter window, the CBN has increasingly intervened in the forex market as an active buyer and seller. It does this for a number of reasons;

  • To stabilise the exchange rate between the naira and dollar.
  • Buy purchasing dollars, analysts believe the CBN also shores up its reserves making it appear robust.
  • Purchasing dollars at its preferred exchange rate band of between 359-362 also gives the CBN enough float to sell to the BDC segment.

Buying forex also means the CBN is likely borrowing local currency at high-interest rates to fund some of these purchases. $4.19 billion bought in March alone will cost the apex bank about N1.5 trillion

Oil receipts, on the other hand, has remained an average $1 billion failing to hit the highs of $3 billion experienced in pre-oil price crash in 2014. The major reason for this is the drop in oil prices and lower volume sales following global rise in oil output. For example, Nigeria’s crude sales to the United States, its previous dominant partner is close to zero, relying heavily on Belgium and India.

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