The Central Bank of Nigeria (CBN) announced that its new policies are working. Between January and June, the forex flows increased to $25.4 billion, which is a 55% rise compared to last year.
CBN explained that this growth was because more money came into the country. In June 2024, capital importation hit $6 billion, and there was also a record amount of money sent home by Nigerians living abroad.
CBN stated: “The CBN’s policies are producing tangible results and boosting confidence in the market. Forex flows increased to $25.4 billion from January to June, a 55% year-over-year rise. This was due to increased capital importation of $6 billion in June 2024, and record remittances from Nigerians abroad.”
Over $305 million Given to Authorized Dealers in Three Weeks
In the past three weeks, CBN sold over $305 million of foreign exchange to authorized dealers. This was done using a two-way quote system that they have been using for a few months to keep money flowing in the interbank market.
CBN also said that on Wednesday, August 7, 2024, they provided $876 million to meet customer bids during an auction.
They used the Retail Dutch Auction System (RDAS) to sell foreign exchange directly to customers. This system promotes a transparent market, helps everyone get the right information, and sets fair prices.
CBN stated: “CBN offered $876 million to meet customer bids in an auction concluded on Wednesday, August 7, 2024.
In line with their commitment to provide transparent access to foreign exchange, CBN now uses RDAS to facilitate direct sales to end users.
This approach aims to create a transparent market, reduce information gaps, and support fair pricing. It complements the two-way quote system, through which over $305 million has been sold to authorized dealers in three weeks.”
CBN’s Small Contribution to Forex Market
CBN also mentioned they only contributed less than 5% of the $43 billion foreign exchange turnover in the official market as of July 2024.
They noted improvements and increased depth in the forex market with diverse liquidity sources. This has led to more stable exchange rates across all market segments.
CBN stated: The forex market is showing signs of improvement and depth with diverse liquidity sources participating. By the end of July 2024, the forex market recorded $43 billion in customer transactions, with CBN contributing less than 5%.”
CBN emphasized their commitment to ensuring a transparent and market-driven forex environment. They plan to continue strengthening the market to meet all legitimate participants’ needs.
Their ongoing efforts aim to boost market confidence and strengthen Nigeria’s economy.
What You Should Know
In its latest RDAS auction, CBN sold $876.26 million at N1,495 per dollar to 26 qualified banks.
Dr. Omolara Omotunde Duke, the Director of the Financial Markets Department, signed the statement explaining that the auction aimed to reduce pressure on the forex market and promote fair pricing.
According to CBN, they received $1.18 billion in bids from 32 dealer banks. However, six banks were disqualified: four missed the deadline, and two submitted incomplete bids.
CBN supplied about 75% of the total bid amount in this latest auction, the biggest so far under Governor Yemi Cardoso.