CBN defends Naira with $10.31bn 

The Central Bank of Nigeria (CBN) has disclosed that it defended naira with $10.31billion as at half year ended June 2020.

The apex bank in its half-year activity report on Wednesday said it continued with its intervention in the inter-bank foreign exchange market to cushion demand pressures and ensure exchange rate stability.

The CBN in its latest report stated that, “In the first half of 2020, the foreign exchange market operations were largely impacted by the decline in crude oil demand, reduced accretion to the reserves due to the drop in crude oil prices and foreign portfolio capital reversals.

“In addition, global COVID-19 lockdowns contributed to the slowdown in economic activities. In response, the Bank took deliberate efforts at sustaining price stability and preserving foreign reserve levels.”

The breakdown according to CBN was that $5.06billion was sold at the Investors & Exporters Foreign Exchange (I & E) window, $1.19billion at the inter-bank spot, $570 million for SMEs, $312.00 million for invisibles, while forwards sales were $3,17billion.

According to the report, “The Bank purchased a total of $2.21billion, which resulted in a net sale of $8.09illion.

“The sum of $5.43 billion matured at the forwards segment, while $2.5billion was outstanding at end-June 2020.

“In comparison with the first half of 2019, a total of $8.47billion was sold at the foreign exchange market.

“This comprised $2.16billion at the inter-bank spot, $810 million for SMEs, $550.70 million for invisibles, $294.59 million at the I & E window, while forwards sales were $4.65billion. The Bank purchased $9.55 billion, which resulted in a net sale of $1.08billion.

“The sum of $4.98billion matured at the forwards segment, while $2.55billion was outstanding at end-June 2019.”

The report explained that in the futures market, the sum of $14.33billion was traded, while $10.83billion matured and $13.17billion remained outstanding at end-June 2020.

According to the report, “At end-June 2019, a total of $8.04billion was traded at the futures market, $3.48billion matured, while $9.3billion remained outstanding.

“The increased level of activities at the futures market was due to investors’ hedging of exchange rate risks caused by the uncertainties arising from the COVID-19 pandemic and fall in the price of crude oil.”

At the Investors and Exporters window, the half—year activity report said, “The turnover of transactions at the window amounted to $24.69 billion at end June 2020, compared to $33.21 billion in the corresponding period of 2019. The decrease in turnover was a result of reduced inflows to the country. Since its introduction in April 2017, the turnover of transactions amounted to $173.41 billion at end-June 2020.”

According to the CBN’s standing facilities report, it explained that “The trend at the window showed a lower recourse to the SLF in the first half of 2020, than the corresponding period of 2019.

“Meanwhile, the threshold for daily deposits per institution at the SDF remained at N2 billion, in line with the policy thrust to encourage real sector lending.

“The applicable rates, for the SLF and SDF, was 15.50 and 8.50 per cent, from January to May 27, 2020, respectively; and 14.50 and 7.50 per cent from May 28 to end-June 2020. In the first half of 2019, the applicable rates for SLF and SDF, was 16.00 and 9.00 per cent, from January to March 25, 2019, respectively; and 15.50 and 8.50 per cent from March 26 to end-June 2019.

“The rates are anchored to the MPR.”

The report stated that FGN domestic debt service was N898.39 billion at end-June 2020, representing an increase of 12.20 per cent, compared to N800.73 billion at end-June 2019.

The report explained that,  “The increase was attributable to the increase in borrowing by the Federal Government. A breakdown of the cost showed that interest expense on NTBs stood at N155.23 billion or 17.28 per cent, coupon payments on FGN Bonds, FGN Green Bonds, FRN Treasury Bonds, and FGN Savings Bonds accounted for N723.01 billion (80.48 per cent), N 1.81 billion (0.20 per cent), N1.45 billion (0.16 per cent) and N 0.82 billion (0.09 per cent), respectively. Rental payments on FGN Sukuk were N16.07 billion or 1.79 per cent.”