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CBN sells $5.78 billion to defend naira in first half of 2023

Again, Customs slashes FX duty rate to N1,238/$

The Central Bank of Nigeria (CBN) defended the naira through its intervention in the foreign exchange (FX) market by a net sale of $5.78 billion in the first half of 2023.

Conversely, the apex bank purchased a total of $655.53 million in the market, the half year financial market activity report released on the CBN website on Tuesday revealed.

When compared with the previous half year, the CBN’s net FX sale dropped by 26.84 percent from $7.90 billion at the end of June 2022.

The Bank sustained its intervention in the foreign exchange market in a bid to moderate demand pressures and ensure exchange rate stability. In the review period, spot transactions were lower compared with the corresponding period of 2022, while transactions in the forward market were marginally higher.

According to the report, a total of $6.44 billion was sold at the foreign exchange market comprising spot and forward sales in the sum of $1.56 billion or 24.19 per cent and $4.88 billion or 75.81 per cent, respectively.

The spot sales comprised $612.41 million or 9.51 per cent of total foreign exchange sold at the inter-bank Secondary Market Intervention Sales (SMIS) window, $455.31 million or 7.07 per cent for Small and Medium Enterprises (SMEs), $441.75 million or 6.86 per cent for invisibles, and $48.00 million or 0.75 per cent at the Investor’ and Exporters’ (I&E) window.

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Furthermore, $5.68 billion matured at the forwards segment, while $7.54 billion was outstanding at the end of June 2023.

In the corresponding period of 2022, total sales amounted to $9.23 billion, comprising spot and forward sales of $4.39 million or 47.57 per cent and $4.84 billion or 52.43 per cent, respectively.

The composition of spot sales was made up of $2.08 billion or 47.28 per cent at the I&E window, $834.74 million or 19.01 per cent for SMEs, $622.92 million or 14.19 per cent for SMIS, and $856.81 million or 19.52 per cent for invisibles. The Bank also purchased $1.32 billion during the review period, translating to a net sale of $7.90 billion. Meanwhile, $4.23 billion matured at the forwards segment, while $5.82 billion was outstanding at the end of June 2022.

The naira-settled Over the Counter (OTC) foreign exchange futures were introduced in 2016 to provide a platform for market participants to hedge foreign exchange risk.

In the first half of 2023, $4.22 billion was traded in the futures market. $1.72 billion matured, while $6.78 million remained outstanding at the end of June 2023. In 2022, a total of $1.43 billion was traded, while $3.00 billion matured, and $3.77 billion remained outstanding at the end of June 2022.

Implementing the N720.00 billion/CNY15.00 billion Bilateral Currency Swap Agreement between the Bank and the People’s Bank of China (PBoC), which commenced in July 2018, was renewed in April 2021 for another three-year term. Thus, CNY765.32 million was sold in 11 auctions during the review period, compared with CNY1,263.51 million in 13 auctions in 2022. Consequently, the total sales from inception to the end of June 2023 stood at CNY9,219.22 million.