CBN sells $180 million forex to boost liquidity

CBN building

The Central Bank of Nigeria (CBN) yesterday released additional $180 million to the forex market to further ease business transactions in the country.

The intervention was done in two phases – an $80 million offer for Personal Travel Allowance (PTA), school fees and medicals at the inter-bank market and $100 million Wholesale Forwards Market sell, which by the new policy, is reduced to maximum of 60-day tenor.

The CBN Acting Director of Corporate Communications Department, Isaac Okorafor, said that the latest moves were part of the bank’s pledge and determination to increase liquidity in the foreign exchange market.

“In keeping with its determination to increase liquidity in the foreign exchange market, the Central Bank of Nigeria (CBN) has released another $100 million into the wholesale forwards segment of the market and pumped an additional $80 million into the banks specifically for the settlement of dollar demand for school fees, medicals and Personal Travel Allowance (PTA), among others.

“The commitment to providing enough forex for legitimate business remains unshaken and we will do everything possible to ensure the steady supply of forex to the market,” he said.

Only last week, the apex bank had pumped $500 million into the market, which impacted positively on the value of the naira against major currencies of the world, particularly the United States dollar, which fell against the naira from N520 to N466 to $1.

The efforts by the CBN in making available large amount of forex to the market has led to the appreciation of the naira by over N85 in less than one week. There are fears in the market that the local currency may well be on a permanent journey to its natural value put by some analysts at less than N300 to the dollar.

The CBN had maintained that much of the dollar demand had been a bubble created by speculators and hoarders of the greenback. On a radio programme yesterday, the apex bank had warned market players and keepers of dollars to make hay and sell their holdings to avoid heavy losses.

Meanwhile, analysts, although raising fears of sustainability of the market intervention, have admitted that the new policy direction is gradually bringing sanity into the forex market, as well as strengthening naira’s value.

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  • Simon JEGGI

    Why is CBN taking time to flood the market with dollars

  • Abubakar musa

    The development is highly welcome but, if CBN has finish her dollars what would be the next solution?

  • real

    This is a very short term solution and could even be considered a quick fix solution. The central bank can’t continue this because it has limited supply of dollar and by doing this, it continues to encourage the speculation and the high demand of dollar. The core problem hasn’t even begun to be solved. Nigeria has a massive demand for dollars, and we don’t earn enough. The medium to long term solution is to completely reduce the demand for dollar to a very sustainable level. This means increase local demand and production. This solution is like giving a heart attack patience adrenalin, once the drug wears off, the problem would quickly come back in a massive way.