CBN intervention sustain Naira stability

Consistent intervention by the Central Bank of Nigeria (CBN) may have impacted positively on the naira, as the local currency seems to have achieved some level of stability on the parallel market in the last fortnight. Although it declined to N210 to the dollar yesterday compared with N208 that it exchanged last Friday, the naira has not dropped below N215 to the dollar on the parallel market in recent weeks.

The naira had weakened on the parallel market to as much as N242 to the dollar last month, on persistent dollar demand after CBN limited importers’ access to dollars on the official interbank market to buy a wide range of goods, in order to save its reserves.

The local currency, has, however, remained stable at N197 to the dollar on the official interbank bank. Dealers attributed the naira’s recent stability on the parallel market to the twice-weekly sale of foreign exchange to Bureaux De Change (BDC), which the CBN commenced three weeks ago. A Lagos-based BDC operator, Mr. Jacob Awuzia, told the New Telegraph that in addition to the regular $30,000, which the apex bank sells to BDCs on Wednesdays, it had in the last three weeks also sold dollars on Fridays to operators.

He said, “The CBN has intervened actively in the market in the last three weeks, selling dollars on Wednesdays and Fridays. This has helped to ease the pressure on the naira. However, nobody is sure of how long the CBN would be able to sustain this kind of intervention. For instance, no one is sure at this moment whether the CBN would sell dollars once or twice this week.”

He disclosed that the uncertainty about the CBN’s ability to sustain the intervention has been fuelled by the fact that the regulator does not usually give BDCs any prior notice about whether it would sell dollars once or twice in a particular week. According to industry analysts, the CBN’s ability to sustain its intervention would depend on whether oil prices recover or not. They pointed out that with oil prices suffering further decline in recent days, the prospects don’t look good for the naira.