The Central Bank of Nigeria sold $4.86 billion worth of foreign exchange to authorities dealers in the first quarter of 2022. This is indicative of a 5.8% decrease, compared with the previous quarter.
This was disclosed in the Central Bank’s latest economic and statistical report for the first quarter of 2022. The Central bank’s sale of foreign exchange is done to stabilize the Naira, however, the stability of the official exchange rate comes at a cost to the reserves as the central bank sells foreign exchange in the official window from its external reserves.
Despite multiple interventions by the CBN to defend the Naira, the Naira fell by N22 in the first quarter of 2022. The average turnover at the Investors and Exporters (I&E) segment declined by 35.8%, relative to the previous quarter, reflecting decreased liquidity in the window.
What the CBN is saying
The CBN said, “Total foreign exchange sales to authorised dealers by the Bank, at US$4.86 billion, decreased by 5.8 per cent, compared with the previous quarter’s level. Disaggregation shows that foreign exchange sales at interbank/invisibles and SMIS windows declined by 16.9 per cent and 10.8 per cent to US$0.46 billion and US$1.79 billion, respectively, relative to the levels in the preceding quarter.“
The bank also stated that activity in the CBN official exchange rate market declined. The bank said, “SME interventions and sales at the Investors & Exporters’ (I&E) window, decreased by 2.0 per cent and 26.7 per cent to US$0.38 billion and US$1.41 billion, compared with the amounts in the preceding quarter. However, matured swap contracts rose by 187.33 per cent to US$0.82 billion, relative to the previous quarter’s level”
The bank added, “The average turnover at the Investors and Exporters’ (I&E) segment declined by 35.8 per cent to US$0.12 billion, relative to the previous quarter, reflecting decreased liquidity in the window.”
What you should know
- Due to the massive depreciation of the Naira in the black market, the difference between the official and black market values has grown to a whopping N271.
- The black market exchange rate has declined dramatically by 48.87% within the year to trade at N705/$ at the time of writing, while the official exchange rate of the Naira at the CBN has stayed relatively stable at about N434/$.
- The decline in forex supply stands in the face of increasing demand for dollars. Nairametrics reported earlier that thousands of applicants are facing harrowing experiences as they get their PTA in two or three tranches depending on what is available in the bank’s vault.
- Since the dollars at the official exchange rate is difficult to obtain and rationed, this leaves the general population with no choice but to obtain Forex through other means.
