Data Shows CBN Not Defending Naira With FX Reserves – Businessday

Data showing the Central Bank of Nigeria (CBN)’s rare interventions in the foreign exchange market prove that it is not defending the naira with its foreign reserves.

Data from FMDQ Securities Exchange shows the CBN has only sold $581 million in the official market, otherwise known as NAFEM, this year.

That means the CBN’s sales accounts for only 3.2 percent of the total market turnover of $17.938 billion in the same period.

The data which shows the paltry dollar sales of the CBN in the FX market contradicts claims that the Abuja-based bank has been burning through its reserves to defend the naira.

The apex bank has also sold around $60 million to BDCs over the last two months since it resumed dollar sales to them this year. That’s yet more proof that the naira appreciation seen over the last month is not being driven by CBN interventions.

Current figures from the CBN, as of April 15, 2024, reveal that the FX reserves sat at $32.29 billion, a decline from $34.45 billion recorded on March 18, 2024.

The decline is down to debt repayments rather than defending the naira, according to Olayemi Cardoso, the CBN governor.

“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 it also part of keeping your credibility intact,” Cardoso said during the IMF/World Bank spring meetings Wednesday.

Nigeria faces significant external debt service requirements, including payments on Eurobonds and other international financial obligations.

The repayments of these debts require substantial amounts of foreign currency, further draining the reserves.