CBN Takes Another Bold Step to Help Naira Recover against US Dollar

• The CBN is determined to find solutions to the naira, and in the last few weeks, has made several decisions
• The latest is the sale of government securities targeting foreign investors as it seeks to boost liquidity in the FX market
• Nigerian currency in the last two days has reversed its gains recorded in both the official and unofficial markets

Legit.ng journalist Dave Ibemere has over a decade of business journalism experience with in-depth knowledge of the Nigerian economy, stocks, and general market trends.

The Central Bank of Nigeria successfully sold N1.3 trillion worth of treasury bills on Wednesday, March 6, 2024, at a very high rate, targeting foreign portfolio investors (FPIs).

This is part of CBN's efforts to attract liquidity to strengthen the naira, which has been experiencing a free fall lately due to a shortage in forex supply.

Read also

Hope rises for Naira as CBN attracts $2.3bn FX inflow from foreign investors

How do treasury bills work?

Treasury Bills, also known as T-Bills, are government-backed, short-term securities issued by the CBN. They are issued when the government needs to borrow funds for a period of time. They have a maximum maturity of 364 days.

Treasury Bills are sold through a bi-weekly auction by the CBN. Buyers quote bids, and the average minimum bid is selected.

The government sells these bills at a lower price (lower than face value). Next, the investor holds on to the T-Bills until the maturity date and, eventually, is paid the full price of the face value.

Details of latest CBN treasury bill sale

The apex bank took to the market N312.9 billion worth of the 364-day but received bids valued at N1.5 trillion from investors.

At the end of the exercise, however, the CBN allotted N1.3 trillion to successful subscribers at 21.49% after the range of bids was between 17.00% and 27.00%

Read also

Nigeria Customs again increases dollar exchange rate to clear goods at ports as naira crashes

The CBN will use the funds realised from the market to support the naira in the forex market and bring the exchange rate below N1,500/$.

Latest naira to dollar exchange rate

Earlier, Legit.ng reported that Nigeria's currency performed poorly against the US dollar in the official exchange markets.

The naira fell by N3.31 in the official market, while in the unofficial market, the naira improved against the dollar.

"In the official market, the Naira sells at N1,605.74/$1, while in the black market, it exchanges at N1,615/$1.

Source: Legit.ng