The Central Bank of Nigeria (CBN) has continued to take major steps to keep the naira stable in line with its exchange rate stability objective. The apex bank has intensified interventions in the market, boosting FX supply to retail end users, reducing distortions in the market and maintaining effective foreign reserves management and accretions. Bamidele Ogunwusi, writes
The injection of liquidity into the market and rising compliance with FX regulations have reduced the sharp depreciation of the naira at official and parallel markets and buoyed foreign investors’ interest in the domestic economy.
The timely interventions of the Central Bank of Nigeria (CBN) through policy implementations and injection of liquidity into the forex market effectively halted the naira slide and restored stability in the forex market.
Aware of its exchange rate stability mandate, the apex bank recently injected $360 million through authorized dealers into the market, which helped to mitigate a steeper devaluation amid the resurgence of demand pressures.
The official FX rate exchanges at N1,530/$, while the local currency exchanges at N1,580/$ in the parallel market. CBN’s robust interventions — including last week’s selling of $360.00 million to authorized dealers have continued to help stabilize the naira.
The naira stability is also driven by inflows from Foreign Portfolio Investors (FPIs), substantial contributions from International Oil Companies (IOCs), and the CBN’s $18.40 million previous interventions to authorised dealers.
There is also renewed interest of Foreign Portfolio Investors (FPIs) in the FX market—driven by improved market confidence, a more efficient FX framework, and strengthening macroeconomic conditions.
Analysts at Cordros Research said the gross FX reserves increased by $12.06 million week-on-week to $38.36 billion after nine consecutive weeks of decline.
Group CEO, Baobab Group, Philip Sigwart, said the Nigeria forex market has turned a corner, with stability allowing more companies to invest in the economy.
He disclosed that given the improved business confidence and stability in the forex market, his company will not only inject new capital into its operations but lend more to businesses.
Sigwart, based in Paris, at the Baobab Group headquarters, spoke during a media briefing in Lagos. He said the volatility in the forex market that made it difficult for businesses to plan and invest has been addressed and now is the time to invest and expand its operations in Nigeria to at least 100 branches, targeting an N1 trillion balance sheet.
Many other stakeholders have applauded the CBN’s reforms that kept the exchange rate stable and attracted a new wave of investment into the economy.
President, Association of Bureaux De Change Operators of Nigeria (ABCON), Aminu Gwadabe, attributed the ongoing stability of the naira against dollar and other world currencies to the CBN’s policies.
Gwadabe said key policies like the Foreign Exchange (FX) Code, rising investors confidence, and foreign direct investment supporting policies are effectively putting FX speculators in check.
He said the FX Code implementation is comprehensively addressing various aspects of market conduct and practices.
For instance, the policy authorises the CBN to establish and enforce directives regarding the standards for financial institutions under which FX deals are to be conducted.
Gwadabe said the code further entrenches transparency and accountability in the FX market and continually sustains naira stability and rally.
He also backed CBN’s position that all institutions engaged in the foreign exchange market must also provide the CBN with a detailed implementation plan outlining how they intend to achieve full compliance with the FX Code.
These plans are expected to be formally approved and signed by the institution’s board of directors, and they must be accompanied by relevant extracts from the board meeting where the plan was reviewed and endorsed.
CEO, Countryside Markets Limited, Stevens Michael, said: “For me, the whole idea is just to ensure that there is a lot more sanity in the foreign exchange market because certain characters have created a whole lot of problems over the years in the foreign exchange market”.
The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, had at the launch of the Nigeria Foreign Exchange Code (FX Code), emphasised integrity, fairness, transparency, and efficiency as critical pillars for driving Nigeria’s economic growth and stability.
He said that the FX Code was built on six core principles: ethics, governance, execution, information sharing, risk management and compliance, as well as confirmation and settlement processes.
These principles, he explained, aligned with international standards while addressing the unique challenges within Nigeria’s foreign exchange market.
According to Cardoso, “The FX Code represents a decisive step forward, setting clear and enforceable standards for ethical conduct, transparency, and good governance in our foreign exchange market. The era of opaque practices is over. The FX Code marks a new era of compliance and accountability. Under the CBN Act 2007 and BOFIA Act 2020, violations will be met with penalties and administrative actions.”
Besides the FX Code, the apex bank also introduced the Electronic Foreign Exchange Matching System (EFEMS), which has proven effective in other economies in enhancing the functionality of the foreign exchange market.
The EFEMS was meant to check forex market distortions, eliminate speculative activities and instil transparency. The EFEMS, which is commonplace in developed and developing markets offers real-time information on currency rates, trading volumes, and market activity.
