The Central Bank of Nigeria has revealed that the net foreign exchange flows into the country increased to $25.4bn in the first six months of 2024, marking a 55 per cent increase from the figure recorded year-over-year.
It said the evident progress is a result of its policy measures, as the naira closed at the rate of N1,596 against the United States dollar on Thursday, maintaining the same rate as it closed on Wednesday.
CBN’s revelation on foreign exchange flows came against the backdrop of the apex bank’s $876m auction to 26 banks to resolve unmet FX demands.
A statement from the apex bank on Thursday noted that this growth had been fueled by a rise in capital importation, which reached $6bn in June 2024, and record inflows from diaspora remittances through formal channels.
The statement read, “The CBN’s policy objectives are yielding tangible results and bolstering market confidence. Net foreign exchange flows rose to $25.4bn between January and June, marking a 55 per cent year-over-year increase.
“This growth has been driven by a rise in capital importation, which reached $6bn in June 2024, and record inflows from diaspora remittances through formal channels.”
The CBN further noted that over $305m of foreign exchange has been sold to authorized dealers in the last three weeks through a two-way quote system, which has been deployed over the past few months to enhance liquidity in the interbank market.
According to the statement, the CBN offered $876m to meet bids submitted by customers during an auction concluded on Wednesday, August 7, 2024.
This was done through the Retail Dutch Auction System, which is designed to facilitate FX sales to end users directly, promoting a more transparent market, reducing information asymmetry, and aiding in price discovery.
The statement read: “In the latest testament to the Central Bank of Nigeria’s ongoing commitment to support the proper functioning of the foreign exchange market by enhancing liquidity when necessary, the apex bank offered $876m to fulfill bids submitted by customers at an auction concluded on Wednesday, August 7, 2024.
“In line with its pledge to provide transparent access to foreign exchange for all legitimate customers, the CBN’s leadership has introduced an additional mechanism through the Retail Dutch Auction System to directly facilitate FX sales to end users.
“This approach aims to foster a more transparent market, reducing information asymmetry and supporting price discovery. It complements the two-way quote system deployed over the past few months to enhance liquidity in the interbank market, through which over $305m of foreign exchange has been sold to authorised dealers in the last three weeks.”
The apex bank also said that it contributed less than five per cent of the $43bn foreign exchange turnover recorded on the official market as of July 2024.
In its statement, the CBN noted that the FX market is showing signs of improvement and increased depth, with more robust and diversified sources of liquidity contributing to the sustained convergence of exchange rates across all market segments.
The statement added, “The foreign exchange market is also showing signs of improvement and increased depth, with more robust and diversified sources of liquidity contributing to the sustained convergence of exchange rates across all segments of the market. The official market recorded a turnover of $43 billion in customer transactions by the end of July 2024, with CBN-supplied liquidity representing less than five per cent of total market activities.”
The CBN also stressed that it is committed to fostering a transparent, market-driven foreign exchange environment and will continue to strengthen the market’s capacity to meet the needs of all legitimate participants.
Since his office last year, the CBN under the leadership of Olayemi Cardoso, has employed a variety of policies to stabilise the foreign exchange market and boost productivity.
While government officials claim there have been massive improvements, the lives of average citizens have yet to improve due to soaring inflation and the high cost of living.
Commenting in an earlier interview with The PUNCH, the Chief Executive Officer of Cowry Treasurers Limited, Charles Sanni, stated that recent intervention by the apex bank to improve liquidity in the foreign exchange market will shore up the naira against the United States Dollar.
Sanni, in a telephone interview with our correspondent, said, “What CBN has done is improved liquidity by the way of supply to the market. So its expected impact, which we are already seeing, is that the Naira will begin to firm up, meaning that it would trade at a better exchange rate.”
On his part, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, applauded the intervention by the apex bank, stressing that the naira volatility has negatively impacted the economy and business and reduced investors’ confidence.
He said, “The intervention is welcome because the CBN is the custodian of our major FX inflows, especially from the oil sector. To ensure stability and reduce volatility in the foreign exchange market. The CBN must intervene from time to time at an exchange which the CBN thinks is sustainable. This is what we have advised all along, and it is good that the CBN is doing that.
“Volatility is very bad for the economy, for business and investors’ confidence. So what the CBN is doing is to see how it can ensure some stability in the exchange rate.
Meanwhile, the naira closed at the rate of N1,596 against the United States dollar on Thursday, maintaining the same rate as it closed on Wednesday.
The naira traded at an intra-day high of N1,616 and a low of N1,520 to a dollar.
Dollar supply between willing sellers and willing buyers also increased to $141.99m on Thursday from $93.92m recorded on Wednesday.