Experts Open Up on What to Expect as CBN Makes Fresh Dollar Sale to Currency Trader

• The CBN anticipates that the recent dollar sales to authorized dealers would support the value of the naira in the coming weeks
• This came after the CBN intervened in the forex market by selling a total of $122.67 million to 46 authorized dealers
• Experts said the impact on the local currency will be favorable as the development is expected to lead to appreciation

Legit.ng journalist Zainab Iwayemi has over 3-year-experience covering the Economy, Technology, and Capital Market.

In the upcoming weeks, the Central Bank of Nigeria (CBN) expects that the recent dollar sales to authorized dealers will strengthen the value of the naira.

In an effort to encourage stability and lessen market volatility, the CBN intervened in the foreign exchange market yesterday by selling a total of $122.67 million to 46 authorized dealers.

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Experts predict that it will strengthen the naira and increase liquidity, which will ease demand pressure on the foreign market.

Muda Yusuf, CEO of the Promotion of Private Enterprise, told BusinessDay,

“It is supposed to strengthen the naira. The naira stability is a function of demand and supply. In recent days, the naira seems to have come under pressure. This is likely to moderate the pressure.”

What matters, according to him, is that it be sustainable and consistent.

Yusuf further said,

“We need to generate that confidence in order to prevent people from speculating against the naira. The naira stability is very important. So, I think it is a good thing that they intervened.”

The impact on the naira will be favorable, according to Ayodele Akinwunmi, senior relationship manager, corporate banking group, FSDH Merchant Bank.

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He said,

“We expect that it will enhance the value of the naira in subsequent weeks. Supply to the market should not be one-off. It will likely lead to sustained appreciation in the value of the naira.”

According to data from the FMDQ Securities Exchange Limited, the dollar was quoted at N1,563.80 on Friday at the Nigerian Autonomous Foreign Exchange Market (NAFEM), down from N1,554.65 on Thursday. As a consequence, the naira ended the week down 0.58.

The dollar given by interested buyers and sellers fell from $348.82 million on Thursday to $126.50 million on Friday, a decrease of 63.73 percent.

Data from the CBN website indicates that as of July 11, 2024, Nigeria's external reserves have climbed to $35.27 billion.

In a statement endorsed by Omolara Duke, the director of CBN responsible for financial markets, it was revealed that out of the total sales, $67,500,000.00 was sold to 27 authorized dealers, and on July 10, 2024, $2.5 million was purchased from one authorized dealer.

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The value date for the payments, based on the two-day settlement cycle (T+2), is July 12, 2024. The bid range for the sales on July 10, 2024 was N1,480.0/$–N1,500.0/$.

In a similar vein, on July 11, 2024, $55.17 in total was sold to 19 authorized dealers for N1,540.0/$; no foreign exchange was bought. July 15, 2024 is the value date for the spot sale payments.

Accordingly, the statement called on all approved dealers to make sure that the foreign exchange they buy from the CBN is only used for trade-backed transactions, which need to be reported within a day.

The CBN reassured that it will keep up its efforts to maintain market stability even as it reiterated that it provides foreign exchange to the foreign exchange market in order to increase liquidity through FX spot sales to authorized dealers using two-way quotes.

CBN tells Nigerians what to do

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Naira crushed again in official, parallel markets as dollar inflow improves

Legit.ng reported that with the US dollar at a four-month high, the value of the British pound sterling is rapidly approaching the N2,000/£1 threshold on the parallel market, trading at N1,964/£1.

This increase comes after the Office for National Statistics announced a 0.4% growth in the UK GDP in May.

Despite the naira's current devaluation in the parallel market, CBN Governor Olayemi Cardoso stressed that recent advances in Nigeria's foreign exchange management had restored confidence in the currency.

Source: Legit.ng