In an effort to strengthen the national currency, The Central Bank of Nigeria (CBN) has taken notable steps to stabilise the Naira by selling $543.5 million to authorised dealer banks from September 6 to September 30, 2024. This large-scale intervention, equal to #844.92 billion, was executed to control market Volatility caused by high demand for foreign exchange (FX) linked to commodity imports and serial FX requirements. Despite these efforts, the naira’s value remained under pressure, with a minimal increase of 2.77 percent in the official market.
By the end of September, the naira closed at #1,541 to the dollar in the official window, while the parallel market saw a higher drive, reaching #1,700 per dollar. Omolara Duke, who heads the CBN’s Financial Markets Department, stated in a statement issued in Abuja that these transactions were carried out through two-way quotes within the Nigerian foreign exchange market. This tactic was designed to maintain stability in response to increasing demand pressures. Duke emphasised that the central bank aimed to inform the public about foreign exchange pricing and clarify the rates at which authorised dealers purchased FX.
Under the current CBN Governor, the naira has lost over 50% in value.
Moreover, the ongoing fall of the local currency has raised concerns within the country, mainly since the weakening currency is closely associated with the increasing costs of vital products and services. Since Olayemi Cardoso assumed the role of CBN Governor, the currency has lost over 50 percent in value in a year, underling the economic difficulties and the central bank’s attempts to tackle these issues. Cardoso has recognised the seriousness of the issue, attributing the ongoing foreign exchange demand to the monthly distributions from the Federation Account Allocation Committee (FAAC), which adds additional stress on the local currency.
Throughout the 11 trading days of September, when the CBN conducted its currency sales, an average of 26 authorised dealer banks were served. Significant variations were in the volume of foreign exchange sold and the exchange rates provided. For instance, on September 6, the CBN sold $39 million at exchange rates ranging from #1,580 to #1,605 per dollar, while the highest single-day sale occurred on September 26, when $80 million was sold at rates between #1,570 and #1,580 per dollar. Other notable sales include $77 million on September 11 and $79 million on September 27, with rates varying across the period.
Nigeria’s currency shows its strongest performance since June 2024.
While these interventions offered some relief in the official market, where the local currency saw a slight increase, the gap between the official and parallel market rates widened considerably, fueling anxiety about the future of the currency. The official rate closed at #1,541 per dollar in September, marking the strongest performance for the naira since June 2024, when it reached #1,505 per dollar. However, the parallel market’s rate of #1,700 per dollar at the end of the month underscored the ongoing struggle to achieve lasting stability in the FX market.
Duke and the Financial Markets Department emphasised the CBN’s commitment to enhancing FX availability as part of its overall strategy for managing foreign exchange. The bank’s initiatives are focused on addressing the rising need for foreign currency, primarily influenced by imports and various seasonal conditions. Duke’s comments seek to instill confidence in the public that the central bank is striving to stabilise the market amid persistent difficulties. Regardless of these attempts, Cardoso’s tenure as CBN Governor has been characterised by the naira’s persistent depreciation, with many pointing to structural issues in the national Economy as contributing factors.
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Lastly, the governor has reiterated that they are committed to addressing the root causes of FX demand pressures, but restoring the naira’s value remains difficult. In a more positive development, Nigeria experienced an increase of almost 5 percent in its foreign reserves during September, rising from $36.24 billion to $38.058 billion by the end of the month. This growth suggests that the nation’s economic foundations could be enhanced, possibly helping the struggling naira. While the CBN persists with its initiatives, it is uncertain if these actions will stabilise the foreign exchange market and stop the continued decline of the naira.