Central Bank of Nigeria (CBN) made another move to intervene in the official foreign exchange market to keep the naira strong. FX intervention has reduced drastically as foreign portfolio investors (FPIs) participation in the financial markets increased due to improved transparency brought about by automated currency trading platform. While the naira has seen gains on BMatch electronic FX trading platform, the exchange rate at the Nigerian autonomous foreign exchange window has been fluctuating. But the two spot rates closed to convergence areas, with the official spot rate losing strength due to renewed demand pressures.
On Wednesday, the naira lost to close at N1,545 as per spot data from the FMDQ platform. This happened despite the fact that the Central Bank of Nigeria (CBN) sold US dollar to boost forex liquidity in the market.
The CBN intervened, selling $28.5 million to authorised deposit money banks between the rate of N1,500 and N1,549 per greenback. The exchange rate is projected to claw back losses due to improved transparency and with support by the Central Bank. Explaining why the naira continues to fluctuate even with FX injection, one of the Broadstreet analystS said fluctuation is what makes FX market efficient, saying forex trading is not robotic in nature – sometimes demand will rise faster than aggregate supply, and it will change direction the other time.
CBN sells $28.5m to Banks to boost FX liquidity
