CBN has sold over $4 billion defending the Naira since February 2017
The Central Bank of Nigeria (CBN) seems determined to continue with its intervention in the country’s foreign exchange markets, as it has made arrangements for a $100 million special auction. The apex bank had last month created a special window for investors and exporters. Prior to that, it had opened windows for Personal Travel Allowance(PTA), school fees and Small and Medium Scale Enterprises (SMEs).
While the interventions have caused the Naira to appreciate at the parallel market, several analysts believe they are unsustainable. A crash in crude oil prices and a drop in production volumes in 2016 led to a massive depreciation of the Naira. The same situation could occur in 2017, they argue. CBN governor Godwin Emefiele at last week’s Monetary Policy Committee (MPC) meeting, expressed satisfaction with the appreciation and said the bank would continue with the intervention till there was a convergence between official and parallel market rates.
The willingness to achieve convergence and attain stability in the markets, is good news for industries in the country which were hard hit by the devaluation. Blue chip companies Guinness Nigeria and Lafarge Wapco had to take dollar loans from their parent companies at the peak of the crisis. They have since sought permission from shareholders to raise fresh capital to pay back the loans. Etisalat Nigeria has had difficulties in paying back a dollar loan taken from a consortium of Nigerian banks. Foreign investors have also shown renewed interest in the stock market, causing a rally in share prices. Year to date, the All Share Index (ASI) is up 8.15%.