Rising Dollar Rate: CBN Sells $86 Million in Spot FX Market, Marks First Sale in 5 Months

The Central Bank of Nigeria (CBN) has executed its first sale of dollars in the spot FX market since September 2023.

The move, aimed at addressing the currency’s volatility, saw the CBN selling up to $86 million on Tuesday.

Sources familiar with the matter revealed that the apex bank offered the dollars at a rate as low as N1490 per dollar, with individual banks securing amounts ranging between $2-5 million.

Unlike previous interventions where rates were fixed, the CBN opted for a more open approach by allowing banks to bid freely, signaling a positive development for the market dynamics.

This decision comes after the CBN had temporarily suspended dollar sales to tackle a backlog in foreign exchange demand, which had been undermining investor confidence in the apex bank’s currency reforms.

While the move is viewed as commendable by industry insiders, analysts emphasize the importance of professional and consistent execution to fully leverage its benefits. Establishing a pattern for these sales is seen as the next crucial step towards stabilizing the exchange rate trajectory.

The naira’s recent performance underscores the urgency of such interventions, with the official foreign exchange market witnessing a record low of 1,534.39 per dollar on Monday due to demand outstripping supply.

Governor Olayemi Cardoso highlighted the ongoing challenge of clearing the backlog, citing outstanding forward contracts totaling $2.2 billion in an interview earlier this month.

As at the time of filing this report, the amount of dollars sold by the CBN has been updated to $86 million from an initial $30 million earlier in the day.