CBN has released $543 million to stabilize the dollar-to-naira exchange rate, aiming to address currency volatility. Find out more about this monetary intervention.
The Central Bank of Nigeria (CBN) has disclosed that it sold $543.5 million to licensed commercial banks between September 6 and September 30, 2024 to address volatility in the foreign exchange market.
In a statement by the CBN’s Director-General for Financial Markets, Mr. Omolara Duke, the bank acknowledged that the sale took place over 11 working days, utilising the two-way quotation mechanism of the Nigerian Foreign Exchange Market (NFEM).
The purpose of the measure was to control the volatile market, caused by robust demand for raw material imports and seasonally increased demand for foreign currency. Duke further explained that the settlement date for all transactions is based on the T+2 system, meaning that settlement will take place two days after the transaction date.
“The statement is intended to inform and provide guidance to the public on the pricing of foreign exchange.
“This will be based on the range of rates at which the CBN sold foreign exchange to authorized dealers.
Read Also: CBN Approves New FX Sale Rate to BDCs: N1,590/$
“The CBN will continue to facilitate foreign exchange supply to the NFEM as part of its comprehensive foreign exchange management strategy,” she said.
Recall, the CBN had earlier announced the introduction of the Electronic Foreign Exchange Adjustment System (EFEMS) for foreign exchange (FX) transactions in the NFEM.
Duke said the new system should improve governance and transparency, allowing for a market-driven exchange rate that is accessible to the public.
“It is expected that the development will reduce speculative activities, remove market distortions and provide the CBN with enhanced oversight capabilities to effectively regulate the market.
“Authorised dealers will then settle all their foreign exchange transactions in the interbank foreign exchange market through the CBN approved EFEMS where transactions are considered instantly,” she said.
She said there will be a two-week trial in November, adding that the central bank will publish real-time prices once EFEMS is up and running.
She said the CBN will also issue buy and sell orders through the system and will work with the Financial Market Dealers Association (FMDA) to issue regulations for EFEMS.
“The Nigerian Foreign Exchange Act and the revised Market Operation Guidelines for the Nigerian Foreign Exchange Market also provide guidance to market participants.
“Authorised dealers must therefore comply with the existing guidelines and regulations governing the Nigerian foreign exchange market.
“We need to ensure that all the necessary documentation, training and system integration is completed by the go-live date,” she said.
The move underlines the CBN’s commitment to promoting a transparent and stable exchange rate between the US Dollar and the Nigerian Naira among others.
