CBN mops up dollars to slowdown Naira appreciation

The Central Bank of Nigeria (CBN) slowed naira appreciation at the official window and mopped up about $190 million from the local currency market last week.

The local currency had appreciated speedily at the official window, but the exchange rate retreated for the last three trading sessions that closed on Friday.

Some analysts warned that the naira’s successive rally would force foreign investors to exit the fixed-income market. Selling down their interest in investment securities will lead to a spike in demand for the US dollar.

This could plunge the market into abysmal conditions and increase US dollar outflow from the economy. Despite the absence of FX intervention, the local currency has been relatively stable versus the dollar.

To avoid rocking the boat, the CBN, for the first time in a long time, began buying dollars. Last week, CBN purchased $189.80 million to absorb excess supply and moderate naira gains, TrustBanc Financial Group Limited said in a report.

The investment firm said the currency strengthened across both segments, appreciating ₦9.09 week-on-week in the official window to ₦1,346.32/$, while the parallel market gained ₦60.00 to ₦1,340/$.

TrustBanc reported that the FX spread narrowed sharply to 0.47% from 3.29% last week, reflecting improved convergence between both markets.

On the macro front, analysts said firmer oil prices, rising reserves and reform-driven inflows continue to support currency stability despite lingering geopolitical risks.