CBN Sells $148m to 29 Authorized Dealers Amid Naira Fall

The Central Bank of Nigeria (CBN) has taken a significant step to stabilize the foreign exchange market by disbursing $148 million to 29 authorized dealers. This move comes in response to the recent decline of the naira. According to a statement posted on the CBN website, the sales were made on Monday, July 22, and Tuesday, July 23, 2024, with exchange rates ranging between 1,470.00/$1 and 1,510.00/$1. The authorized dealers include banks and Bureau De Change (BDC) operators. This action follows the CBN's recent sale of $122.67 million to 46 authorized dealers, aiming to increase liquidity and stabilize the market. Additionally, the CBN announced a sale of $20,000 to each BDC at a rate of 1,450/$1 a week ago.

Despite these efforts, the naira has continued to depreciate against the US dollar, trading above N1,600 on Thursday in the official market. The CBN statement read, "The Central Bank of Nigeria sold a cumulative sum of $148,000,000.00 in the Nigerian Foreign Exchange Market to Authorized Dealers on July 22 and 23, 2024. The sale of foreign exchange was to 29 Authorized Dealer banks at an exchange rate of 1470.00/US$1-1510.00/US$1." It also noted that the CBN purchased $2 million from one authorized dealer bank at the rate of 1,505.00/$. "The value dates for all the transactions held on July 22, 2024, was T+0, while that of July 23, 2024, was T+0," the statement concluded. Financial analysts have expressed concerns over the recent trend of high foreign liquidation in the Nigerian Exchange, with N311.41 billion worth of investments withdrawn in the first half of this year. This has raised fears of naira devaluation and its potential impact on the Nigerian economy.

A report titled ‘Domestic & Foreign Portfolio Investment’ by the Nigerian Exchange (NGX) indicated that N311.41 billion worth of portfolio investments were liquidated in the first half of the year, compared to N73.06 billion in foreign outflows recorded in the same period in 2023. Financial analyst Olaid Baanu highlighted the sharp increase in foreign capital inflows to N229.07 billion in the first half of the year, up from N72.02 billion in the same period the previous year. This initially indicated growing interest from foreign investors and bolstered market confidence. "While the increased inflows are encouraging, the high liquidation indicates that foreign investors are cashing out their profits, which could destabilize the market," Baanu explained.