Data reveals CBN not protecting the naira with FX reserves

[Tofunmi]

Data demonstrating the Central Bank of Nigeria’s (CBN) seldom involvement in the foreign exchange market demonstrate that the CBN is not using its foreign reserves to support the naira.

The CBN has only sold $581 million on the official market, also known as NAFEM, this year, according to data from the FMDQ Securities Exchange.

That indicates that only 3.2% of the $17.938 billion in market turnover during the same period came from the sales of the CBN.

Data demonstrating the CBN’s pitiful dollar sales in the foreign exchange market refutes reports that the Abuja-based bank has been depleting its reserves in an attempt to support the naira.

Since it started selling dollars to BDCs again this year, the apex bank has also sold about $60 million to them in the last two months. That provides additional evidence that CBN interventions are not the cause of the naira’s appreciation during the past month.
In April, Nigeria lost $2.16 billion in foreign reserves in a single month, bringing them to a seven-year low.

As of April 15, 2024, the CBN’s current numbers show that the foreign exchange reserves were $32.29 billion, down from $34.45 billion on March 18, 2024.

The CBN governor, Olayemi Cardoso, claims that loan repayments, not defending the naira, are the cause of the slide.

During the IMF/World Bank spring meetings on Wednesday, Cardoso stated, “What you see with respect to the shifts in our reserves is the shift you will find in any country’s reserve situation where, for example, debts are due and certain payments need to be made and they are made because that is also part of keeping your credibility intact.”

Nigeria must make large payments on its external debt, including Eurobonds and other foreign financial commitments.

Significant sums of foreign currency are needed to service these obligations, further depleting the reserves.