© 2019 - International Centre for Investigative Reporting
CBN used $9.98b to sustain forex market in Q4 2019─Report
THE Central Bank of Nigeria (CBN) from the economic report on its website confirms it sold $9.98 billion to authorized dealers in the fourth quarter of 2019.
This was contained in the CBN’s economic report for the fourth quarter released in December 2019.
The report indicated that the amount used to sustain Forex in the Q4 dropped when compared with the third quarter during which the bank used $10.02 billion for the same purpose.
The decline represents 0.4 percent in the fourth quarter.
“The development, relative to the preceding quarter, reflected mainly the decline in foreign exchange sales to the BDCs, interbank, swaps transactions and wholesale forwards in the review quarter,” CBN said in the report.
Foreign exchange sales to BDCs dropped by 11.2 percent, interbank fell by 10.1 percent, swaps fell by 8.0 percent, secondary market intervention sales (SMIS) fell by 3.5 percent and wholesale forward intervention fell by 2.3 percent.
Babangida Aminu, a BDC merchant in Abuja who spoke to The ICIR, confirmed that his business slowed down a bit during the last quarter of 2019 due to drop in FX by CBN to BDC operators.
He also confirmed that during the period, he sold a dollar at N361 as against N360 in the preceding quarter, which according to him was due to the drop.
In the CBN report, the apex bank also showed how it sustained its interventions at both the Inter-bank and the BDC segments of the foreign exchange market in the fourth quarter.
Consequently, the report revealed that the average exchange rate of the naira in relation to the US dollar at the Inter-bank segment, was N306.95/US$, representing a depreciation of 0.01 per cent and 0.08 per cent in the third quarter.
There are fears, however, that BDCs would get dollars from private sources and resell at very high rate when the CBN can no longer sustain the Forex market with funds.
Exchange rate movement is determined by demand and supply for the currencies over time, based on trade value, capital flows and market expectations.
The FX market is a key factor in the sustainability of the naira, a stable currency rate is important to avoid the depreciation of the naira.