CBN’s Move: The Central Bank of Nigeria (CBN) reduced its foreign exchange support to the naira by approximately 30% in October 2024, selling fewer U.S. dollars to authorized dealer banks. This marks a slowdown in the CBN’s efforts to support the naira amid rising pressure on the currency.
The naira has depreciated significantly in the forex market, driven by a shortage of U.S. dollars against strong demand from eligible users within the official exchange window.
In October, the CBN spent $383 million in forex interventions, purchasing naira from local banks to boost liquidity in the official window. This amount represents a 29.53% decline in foreign exchange sales compared to the $543.5 million spent in September to stabilize the naira.
Analysts observe that the CBN appears increasingly aligned with a “willing buyers, willing sellers” exchange rate model. However, challenging macroeconomic conditions have complicated a full transition to this market-driven approach.
Improved dollar liquidity in the Nigerian Autonomous Foreign Exchange Market (NAFEM) allowed the naira to trade between ₦1,540 and ₦1,697 per U.S. dollar in October, according to a report by AIICO Capital Limited. Despite the intervention, the naira depreciated overall, closing the month at ₦1,675.49—an 8.66% decline from September.
Although the CBN’s forex sales slowed and the naira weakened, external reserves continued to rise. Nigeria’s gross external reserves grew by $1.43 billion in October, ending the month at $39.79 billion. This growth was supported by reduced CBN interventions, in line with a more market-driven policy approach, according to AIICO Capital.
Further strengthening of external reserves has been supported by consistent inflows, as Nigeria prepares to launch the Electronic Foreign Exchange Matching System (EFEMS) in December 2024. This system aims to improve transparency in the forex market.
Analysts highlight that reserve accretion has been buoyed by government reforms, such as subsidy removal and production incentives, which have bolstered investor confidence. Capital importation reached $6.9 billion by August, reflecting an uptrend in foreign investment.
Finance Minister Wale Edun affirmed the government’s commitment to achieving $1 billion in monthly inflows, emphasizing transparency, improved foreign investment, and economic stability as core goals.
Meanwhile, the naira depreciated by ₦50 in the parallel market over the month, reaching ₦1,750 per U.S. dollar by the end of October.
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