Nigeria’s foreign exchange market witnessed a significant surge in dollar supply, as the Central Bank of Nigeria (CBN) implemented measures to address the current diverse crises and stabilize the exchange rate. In the Nigerian Autonomous Foreign Exchange Market (NAFEM), forex turnover experienced a remarkable increase of 180.59%, reaching $440.13 million compared to $156.86 million.
The CBN’s proactive steps in bolstering dollar supply have yielded positive results. The naira, after reaching an intraday high of ₦1526/$ and a low of ₦838.96/$, closed at ₦1435.53/$ on Friday, marking one of the lowest drops in recent times.
Recognizing the urgent need to address the turbulent forex crisis, the CBN reinforced its commitment to stability through the issuance of new circulars and guidelines. One such circular, titled “Harmonisation of Reporting Requirements on Foreign Currency Exposures of Banks,” aimed at curbing speculative activities by banks in the forex market. The CBN took decisive action by prohibiting commercial banks from buying or holding foreign currencies with the intention of profiting from fluctuating exchange rates.
In another statement, the CBN banned banks and financial technology companies (fintechs) from operating International Money Transfer services (IMTOs). As a result of these measures, banks have reportedly been compelled to sell approximately $5 billion worth of foreign currency.
The CBN’s directives also focused on ensuring that banks no longer hold excess dollar liquidity. Any foreign exchange held by deposit money banks must now be tied to a verified transaction or obligation. By implementing these measures, the CBN aims to enhance liquidity and stabilize the exchange rate, thereby creating a conducive environment for increased foreign investor participation.
The CBN’s recent interventions in the foreign exchange market have contributed to improved dollar supply and represent a significant step towards stabilizing the exchange rate amidst the prevailing crises. These initiatives are expected to restore confidence and attract more foreign investments into Nigeria’s economy.