Boost for Naira as CBN Takes Another Decision to Crash Dollar Exchange Rate
- The CBN is determined to halt the depreciation of the naira in both the official and unofficial forex markets
- The latest move involves selling dollars at a retail auction after receiving a list of outstanding FX demand from banks
- Despite selling $369 million in July, the naira's value continues to decline, prompting the CBN to switch to retail auctions
Legit.ng journalist Dave Ibemere has over a decade of business journalism experience with in-depth knowledge of the Nigerian economy, stocks, and general market trends.
The Central Bank of Nigeria (CBN) hopes to stop the naira's poor performance in the foreign exchange market as it begins dollar sales via retail auction today, Wednesday, August 7, 2024.
Data from FMDQ Securities showed that the dollar exchanged for N1,601/$ on Tuesday in the Nigerian Autonomous Foreign Exchange Market (NAFEM), the official market.
Source: Getty Images
CBN changes to retail auction today
The naira has been facing significant pressure due to seasonal demand from summer tourists and importers.
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In the past year, naira has depreciated against the US dollar by more than 70%.
The apex bank hopes that selling dollars at a retail auction today will halt the trend of naira depreciation.
BusinessDay reports that the CBN has already received a list of all outstanding FX demand by end-users from authorised dealer banks after telling banks in a circular that it was diverging from the usual wholesale auctions to banks.
In the circular, CBN said the change is in response to the "growing unmet foreign exchange demand.”
Historically, the central bank has utilised retail and wholesale currency auctions to supply dollars to the market.
The retail auction directly serves customers, while the wholesale auction provides dollars to banks.
The CBN sold $369 million in July 2024 while buying less than $20 million from the deposit money banks, which failed to give the desired effect.
The CBN hopes that the change in tactics will yield the desired results and bring the naira below N1,600.
CBN sells dollar to BDCs
Earlier, Legit.ng reported that the CBN carried out another round of forex sales on Thursday to licensed Bureau De Change Operators in the country.
Each BDC received $20,000 as the CBN bid to reduce the exchange rate at which the dollar is sold on the street.
The CBN also instructed that the BDCs resell to eligible end-users at a margin not more than 1.5 per cent above the purchase rate.
Proofreading by James, Ojo Adakole, journalist and copy editor at Legit.ng.
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Source: Legit.ng
