The Nigerian Central Bank has distributed $148 million to 29 authorized dealers as part of its efforts to stabilize the foreign exchange market in the wake of the naira’s recent depreciation.
The transactions were made to the dealers on Monday, July 22, and Tuesday, July 23, 2024, between an exchange rate of 1,470.00/$1 and 1,510.00/$1, according to a statement that was released on the website of Apex Bank on Friday. Banks and BDC operators are among the approved dealers, according to the CBN.
This event occurs two weeks after the CBN sold $122.67 million to 46 authorized parties in an effort to lower volatility and increase liquidity in the nation’s stable markets.
It was also stated a week ago that each BDC will receive $20,000 at a rate of 1,450 to $1. In spite of his move, the naira has depreciated against the United Dollar, trading above N1,600 on Thursday at the official market.
The statement read, “The Central Bank of Nigeria sold a cumulative sum of US S148,000,000.00 in the Nigerian Foreign Exchange Market to authorized Dealers on July 22 and 23, 2024.
“The sale of foreign exchange was to 29 Authorized Dealer banks at an exchange rate of 1470.00/US$1-1510.00/US$1.” It added that the apex bank also purchased $2 million from one authorised dealer bank at the rate of $1,505.00.
“In addition, the CBN bought US$2,000,000.00 (Two Million United States Dollars) from one authorised dealer bank at the rate of 1,505.00/US$.
“The value dates for all the transactions held on July 22, 2024, were T+0, while that of July 23, 2024, was T+0,” it concluded.
In an interview with The PUNCH, financial analysts expressed concerns over the recent trend of high foreign liquidation in the Nigerian Exchange, with N311.41 billion worth of investments withdrawn in the first half of this year.
This has sparked fears of naira devaluation and its potential impact on the Nigerian economy.
According to the NGX in a report titled ‘Domestic & Foreign Portfolio Investment’, N311.41bn worth of portfolio investments liquidated in the first half of the year compared with the N73.06bn in foreign outflows recorded in the same period in 2023.
A financial analyst, Olaid Baanu, highlighted the sharp increase in foreign capital inflows to N229.07bn in the first half of the year, up from N72.02bn in the same period in the previous year, stating that this initially indicated growing interest from foreign investors and bolstered market confidence.
He explained, “While the increased inflows are encouraging, the high liquidation indicates that foreign investors are cashing out their profits, which could destabilise the market.”
