Within a space of six months this year, the Central Bank of Nigeria (CBN) has so far expended about $20.91 billion to stabilise the naira at the various segments of the foreign exchange (forex) market.
These include its interventions during the second and third quarters of the year at the forex market derivatives such as forwards and swaps, as well as Investors and Exporters’ (I&E) window, Bureaux de Change (BDCs) and inter-bank sales.
In its Economic Report for Third Quarter 2018, the apex bank explained that a total of $11.88 billion was sold to authorised dealers in the third quarter alone. This represented 24 per cent increase above the levels in the preceding quarter, which was $9.03 billion.
Giving further breakdown, the report says: “The development, relative to the preceding quarter, was attributed to activities at the I&E window and increase in foreign exchange sales to BDCs in the review quarter.
The total foreign exchange forwards disbursed at maturity was $3.24 billion (27.3 per cent); I&E window, $2.84 billion (23.9 per cent); sales to BDCs, $2.41 billion (20.3 per cent); interbank sales, $2.16 billion (18.2 per cent); and swaps transactions, $1.23 billion (10.3 per cent).”
The document shows that CBN sustained its interventions at both the inter-bank and the BDC segments of the forex market.
“However, the average exchange rate of the naira vis-à-vis the US dollar at the inter-bank segment depreciated by 0.1 per cent to N306.03/$, relative to the level at end-June 2018.
Similarly, at the I&E window, the average exchange rate, depreciated by 0.4 per cent to N362.42/$ at end-September 2018, relative to the level at the end of the preceding quarter.
At the BDC segment, the average exchange rate was N359.21/$, representing 0.8 per cent and 1.8 per cent appreciation relative to the levels in the preceding quarter and the corresponding period of 2017, respectively.
Consequently, the premium between the average inter-bank and BDC rates narrowed to 17.4 percentage points in the review quarter, from 18.3 percentage points at the end of the second quarter of 2018.
Similarly, the spread between the average exchange rates at the I&E window and the BDC segment narrowed further to 1 per cent, from 2.5 per cent at the end of the preceding quarter,” the document adds.
However, the interventions left a deep hole in the reserves of the country. According to the report, gross external reserves was down by 9.6 per cent below the previous quarter at $42.61 billion at the end of September 2018. A breakdown of the official external reserves by ownership showed that CBN reserves stood at $35.05 billion (82.3 per cent), Federal Government reserves, $5.29 billion (12.4 per cent) and the federation reserves, $2.26 billion.
Meanwhile, the forex rate last week showed that the CBN spot rate closed somewhat flat at N306.75/$1 from N306.70/$1 in the prior week. Similarly, the exchange rate at the I&E forex window closed at N364.70/$1. At the parallel market and BDCs, the naira traded at N363/$1 throughout the week.