New Telegraph

September 30, 2023

Forex: CBN’s 10-month deal falls by 27% to $12.68bn

  • Strategy to boost foreign reserves


The Central Bank of Nigeria (CBN) sold a total of $12.68billion at the foreign exchange market between January and October last year, latest data released by the apex bank shows.


New Telegraph’s analysis of the CBN’s Financial Markets Department (FMD) Half Year activity reports for 2020 and 2021 as well as its monthly economic reports for the months of July to October for both years, shows that the $12.68billion that the apex bank sold at the foreign exchange market in the first 10 months of last year is 27.76 per cent less than the $16.20billion it sold in the corresponding period of the previous year.


For instance, the FMD  Half Year activity report for 2021, states that “the CBN sustained its intervention in the inter-bank foreign exchange market to cushion  demand pressures and ensure exchange rate stability.

“Consequently, a total of $5.831.61 million was sold at the foreign exchange market. This comprised $1.375.00 million at the I&E window, $734.39 million for SMEs, $435.05 million at the interbank spot, $337.01 million for invisibles, while forwards sales were $2.950.16 million.”


However, the FMD Half Year activity report for the previous year shows that total sales at the forex market amounted to $10.31billion, comprising $5.06billion at the I & E window, $1.20billion at the inter-bank spot, $570.00 million for SMEs, $312.00 million for invisibles, and $3.17billion for forwards sales.


Analysts attribute the significant drop in the CBN’s sales at the forex market in 2021 compared with the previous year’s to strategies adopted by the apex bank to conserve the external reserves in the wake of the Covid- 19 crisis, which affected forex inflow into the country.


Indeed, the regulator, in its monthly economic report for July 2021, stated: “The bank maintained a low profile in its intervention activities in the foreign exchange market, due, majorly, to the stoppage of sales to Bureaux De Change (BDC) operators.


“In exercise of its statutory obligation of maintaining the foreign exchange reserves, safeguarding the value of the naira, and curtailing sharp practices, the bank announced the cessation of its weekly sale of foreign exchange to BDCs at the MPC meeting of July 27, 2021.


“Furthermore, the bank suspended licensing of BDC operators in the country and re-channelled forex sales to commercial banks to meet Personal Travel Allowance (PTA), Business Travel Allowance (BTA), and other customers’ retail needs.


“Consequently, total foreign exchange sales to authorised dealers by the bank decreased by 9.3 per cent to $2.05 billion in July 2021, compared with $2.26 billion at the end-June 2021.


Disaggregation shows that foreign exchange intervention sales at the Secondary Market Intervention Sales (SMIS) and Investors’ and Exporters’ (I&E) windows rose by 17.6 per cent and 34.8 per cent to $0.78 billion and $0.26 billion, respectively.


“The bank’s interventions at the Interbank, SMEs, and Swaps fell by 26.4 per cent, 22.6 per cent, and 47.2 per cent


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