27 November 2017

Nigeria: CBN Injects U.S.$498M in Forex Market in One Week

The Central Bank of Nigeria (CBN) last week raised the tempo of its foreign exchange (forex) intervention in the interbank market to a total of $498 million.

Figures obtained from the central bank showed that it commenced the week by initially injecting $210 million and thereafter sold another $288 million.

The forex intervention at the beginning of the week was for the wholesale, small and medium scale enterprises (SMEs) and invisibles windows.

But the dollar sales last weekend were in favour of the agricultural, airlines, petroleum products and raw materials and machinery sectors.

Confirming the development, the acting Director, Corporate Communications at the CBN, Mr. Isaac Okorafor said the releases were targeted at sustaining liquidity in the market as well as boosting production and trade.

He reiterated that the Bank remained committed to ensuring liquidity in the inter-bank sector of the market and would continue to intervene to drive growth in the economy and guarantee stability in the market.

Okorafor however, stressed that the CBN would not relent in its monitoring of the market to ensure that authorised dealers abide by the extant rules.

The official rate marginally appreciated 10 kobo to N305.85 to the dollar, from last week's N305.95 to the dollar, while in the parallel market, the naira traded flat at N364 to the dollar all through the week.

At the I&E Window, the NAFEX rate closed at N360.25 to the dollar. However, activity level strengthened relative to previous week as offshore investors continue to position innaira assets. Weekly turnover improved to$907.68 to the dollar.

In the FMDQ OTC futures market, the total value of open contracts of the naira settled OTC futures for the 12 instruments on the calendar stood at US$3.4billion from US$3.3billion the previous week. The JUNE 2018 contract received the most subscription (US$40 million) bringing total value to US$185.8 million while the rest of the contracts received minimal participation.

According to Afrinvest West Africa Limited, the naira/dollar NOV 2017 contract with total value at US$543.1 million will be maturing this week.

"We expect this to be replaced by an equivalent Naira/Dollar NOV 2018 contract.

With external reserves at a 30-month high of US$34.9bn coupled with the US$3.0bn raised via Eurobond issuances, we expect the CBN to sustain frequency of interventions and the Naira to remain stable at all segments of the FX market in the near term," the research firm added.

CBN Governor, Mr. Godwin Emefiele last week said the Monetary Policy Committee (MPC) expressed confidence that the tight stance of monetary policy and the stability in the exchange rate of the naira should continue to positively weigh in on price developments.

"The committee reaffirmed its commitment to maintaining price stability, which is crucial to sustainable economic growth and development," he stated.

He said the committee also welcomed the review of the Economic Recovery and Growth Plan (ERGP), in an effort to realise the objectives of the plan, but called for the quick passage of the 2018 Appropriation Bill by the National Assembly, so as to keep fiscal policy on track and deliver the urgently needed reliefs in terms of employment and growth of the economy.

On financial stability, the committee noted the concentration of non-performing loans in a few sectors but observed that the overall condition and outlook for the banking system was stable, as deposit money banks' balance sheets remained strong.

Nigeria

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