The Central Bank of Nigeria (CBN) has sold $48 million to authorized dealer banks in a foreign exchange (FX) intervention designed to stabilize the naira. This action precedes the CBN’s upcoming launch of an automated FX trading platform.
It is anticipated that the dollar auction will improve foreign exchange liquidity in the official currency market and stop the recent depreciation of the naira. Since announcing its intention to automate trading of NGN/USD pairings on the Bloomberg platform, the CBN has been progressively reducing its foreign exchange transactions.
Reduced FX liquidity has weakened the naira against the U.S. dollar in various forex markets. According to Bizwatch Nigeria, the CBN reduced its FX interventions by 30% last month despite an increase in the country’s foreign reserves.
Meanwhile, the Nigerian government has secured approval for $2.2 billion in external loans. On Wednesday, the apex bank intervened in the FX market with the $48 million sale, according to TrustBanc Financial Group’s market update.
Nigeria presently has $40.26 billion in external reserves, while oil prices have fallen to between $72 and $75 per barrel. The launch of the Bloomberg BMatch System for FX trading is anticipated by analysts to increase market transparency and investor confidence.
