In order to maintain stability in the exchange rate, the Central Bank of Nigeria (CBN) spent a total of $17.81billion on interventions at the inter-bank foreign exchange market in 2022 compared to $16.55 billion injected in 2021, according to the annual CBN activity report.
This is just as Nigeria’s external reserves fell by $2.85 billion in the first half of 2023 due to external debt financing among other challenges.
Lower oil production due to oil theft further worsened the Foreign Exchange (FX) supply in the country which fuelled the need for extra intervention from CBN.
The total amount sold of $17.81 billion was distributed at the spot and forward market at $7.12 billion and $10.69 billion, respectively.
According to the report, the spot sales comprised $2.46 billion at the I&E Window (also known as the Nigerian Autonomous Foreign Exchange (NAFEX market); $1.43 billion at the inter-bank; $1.60 billion for SMEs and $1.63 billion for invisible.
On the other hand, the bank purchased a total of $2.17 billion at the inter-bank market.
Thus, net sales by the bank amounted to $15.64 billion. However, at the forward market, the sum of $13.53 billion matured, while $8.31 billion remained outstanding as of December 2022.
CBN’s continuous intervention in the foreign exchange market has contributed to the depletion of the country’s reserve, which fell to $34.22 billion as of June 26, 2023 from $40.53 billion as of December 31, 2021.
Analysts expect lesser intervention funds for 2023 as the recent exchange rate unification outrightly stops the sales of FX at the interbank market.
In the case of future intervention with the CBN’s stance to maintain a managed floating regime, the expected increase in FX supply should help cushion the injections required.
Meanwhile, the CBN revealed in its figures on movement on foreign reserves that the reserves, which commenced January 3, 2023 at $37.07 billion, fell to $34.22 billion as at June 26, 2023.
According to the CBN, the reserves fell by $3.43 billion in 2022, from $40.52 billion as at December 31, 2021 to $37.09billion as of December 29, 2022.
