Connect with us

Money market

CBN re-enters spot FX market with $30m sale to strengthen Naira



By Sodiq Adelakun

In a strategic move to stabilise the Nigerian currency, the Central Bank of Nigeria (CBN) re-entered the spot foreign exchange market on Tuesday with a significant sale of $30 million, marking its first direct intervention since September of the previous year.

This initiative is part of the apex bank’s ongoing efforts to shore up the naira, which has been struggling as one of the globe’s weakest currencies in 2024.

Insiders close to the operations disclosed that the CBN conducted the sale at rates as competitive as N1,490 to the dollar, with allocations ranging from $2 million to $5 million for each participating bank.

“Rather than fix rates, the CBN called banks to bid freely, and that’s good for the market,” according to the source.

This approach marks a shift from the bank’s previous policy, as it allowed banks to bid freely rather than setting fixed rates, a move that is seen as beneficial for the market’s dynamics.

The CBN’s decision to resume dollar sales at the spot market comes after a period of suspension aimed at addressing a backlog of foreign exchange demands.

This backlog had been a point of concern, eroding investor confidence and casting doubts on the effectiveness of the bank’s currency reforms. Market participants have lauded the CBN’s return to the spot FX market, noting that its active presence is expected to significantly enhance trading liquidity.

The bank’s latest actions reflect a commitment to implementing measures that support the naira and, by extension, the broader Nigerian economy.

The CBN had frozen dollar sales at the spot market in order to deal with a foreign exchange demand backlog that was undermining investor confidence in the apex bank’s latest currency reforms.

“CBN being back in the market is highly commendable, as its presence will boost trading liquidity,” another source familiar with the matter said.

Analysts, however, say the CBN needs to conduct the sale professionally and consistently in order to reap the full gains of the latest move.

“This is step one; the next step is to establish a pattern for the sales, and then the exchange rate trajectory will begin to change,” one of the sources said.

The naira on Monday fell to a record low of 1,534.39 per dollar at the official foreign exchange market as demand trumped supply.

The CBN was also urged not to lose sight of completely clearing the backlog. Governor Olayemi Cardoso put the dollars owed by the CBN in forward contracts alone at $2.2 billion in an interview this month.

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Money market

FG urges NIPSS members on creative solutions to national challenge



The Minister of Budget and Economic Planning, Atiku Bagudu, has urged members of the National Institute for Policy and Strategic Studies (NIPSS), to devise creative solutions to Nigeria’s social and economic challenges.

Bagudu received  participants of the Senior Executive Course 46 of the institute in his office on Monday in Abuja.

According to him, some of the issues confronting Nigeria  as a nation might require out of the box solutions.

“The NIPSS was created in the wisdom of our forefathers, to train senior management personnel that can bring unusual solutions to problems confronting us,” he said.

He urged the participants to eschew self-interest and make decisions that can assist the nation to make better choices.

Bagudu  said that the national planning function of the ministry comes from the National Planning Commission.

He said that the digital economy is one area that the ministry was looking at for mass youth engagement and economic prosperity.

“Digital economy is an evolving process.which the country will have to leverage digital for overall growth and development.

“It is a new reality. Today trading platforms are closing shop and increasingly going digital.

“Nigeria needs to respond positively and reap benefits from the digital economy. But we have to make the space safe through effective regulation.

“Some countries have data protection laws which enable them to check and regulate excesses in the digital space,” he said.

The Minister commended the law enforcement agencies for promptly going after digital platforms like Binance, which was used to disrupt the foreign exchange market and to weaken the Naira.

He also commended the Governor of the Central Bank of Nigeria (CBN), Yemi Cardoso, for his various monetary policy decisions that restored confidence in the Nigerian economy.

Continue Reading

Money market

Cardoso to speaks at IMF meeting on FX reforms



The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso will speak on foreign exchange (FX) market reforms at the ongoing International Monetary Fund (IMF) Spring Meetings on Wednesday in Washington D.C.

The meetings of the Boards of Governors of the IMF and the World Bank Group (WBG) bring together central bankers, ministers of finance and development, parliamentarians, private sector executives, representatives from civil society organisations and academics to discuss issues of global concern, including the world economic outlook, poverty eradication, economic development, and aid effectiveness.

Also featured are seminars, regional briefings, press conferences, and many other events focused on the global economy, international development, and the world’s financial system

Cardoso assumed office as the Governor of the CBN in September 2023. Since then he has introduced some new FX policies and adjusted some existing ones to ensure the stability of the naira.

According to Cardoso, the exchange rate in Nigeria has increased/depreciated due to the simultaneous occurrence of two factors: a decline in the supply of US Dollars coinciding with a surge in the demand for US dollars.

He said in February 2023 that the foreign exchange market is currently facing increased demand pressures, causing a continuous decline in the value of the naira. Factors contributing to this situation include speculative forex demand, inadequate forex supply due to non-remittance of crude oil earnings to the CBN, increased capital outflows, and excess liquidity from fiscal activities.

To address exchange rate volatility, he said a comprehensive strategy has been initiated to enhance liquidity in the FX markets.

This includes unifying FX market segments, clearing outstanding FX obligations, introducing new operational mechanisms for BDCs, enforcing the Net Open Position limit, and adjusting the remunerable Standing Deposit Facility cap.

As part of measures to control inflation and stabilise the naira, the CBN last month raised its benchmark interest rate, known as the Monetary Policy Rate (MPR) by 200 basis points to 24.75 percent from 22.75 percent in February 2024.

In her second term message, Kristalina Georgieva, IMF managing director, who was recently reappointed by the executive board of the IMF, said, “I am deeply grateful for the trust and support of the Fund’s Executive Board, representing our 190 members, and honoured to continue to lead the IMF as managing director for a second five-year term.”

Continue Reading

Money market

PenCom recovers N12.45bn from erring employers



The National Pension Commission (PenCom) said it has recovered N12.45 billion from employers that failed to contribute towards their employees retirement.

The recovery would indeed help in wealth creation for the workers, thereby securing them against old age poverty in retirement.

PenCom in its 4th quarter 2024 report, said it has maintained the services of Recovery Agents (RAs) for the recovery of unremitted pension contributions and penalties from defaulting employers.

It submitted that during the quarter, the sum of N319,468,587.45 comprising principal contributions N128,176,029.95 and penalties N191,292,557.50 was recovered from 32 defaulting employers.

It noted that meanwhile, the Commission Secretariat/Legal Advisory Services Department had been requested to take legal action against 4 defaulting employers.

The pension industry regulator maintained that from the commencement of the recovery exercise in June 2012 to 31 December 2023, a total sum of N25,447,085,186.71 comprising of principal contributions N12,929,415,445.52 and penalties N12,517,669,741.19 was recovered from defaulting employers.

Continue Reading