By Chinwendu Obienyi
The Central Bank of Nigeria (CBN) sold the sum of $1.50 billion forex in various FX windows in the first three months (Q1 2022), representing a 7.7 per cent decline when compared to the fourth quarter with $1.62 billion sold in 2021.
The FX intervention is also significantly lower than the pre-pandemic level – Q1 2020 figure of $3.69 billion.
This is according to the recently released data of the Central Bank of Nigeria (CBN) with the decline following stringent FX liquidity concerns, ravaging the Nigerian economy since the COVID-19 pandemic struck in 2020. The decline could be attributed to the halt in the sale of dollars to Bureau De Change operators (BDCs) in July 2021.
The disaggregated data from the CBN showed that the apex bank’s FX intervention declined across the interbank (-17.0 per cent q/q) and Investors & Exporters + SME + Invisibles (-6.5 per cent q/q) windows while the CBN is yet to resume FX sales to the BDCs.
Accordingly, parallel market premium widened to 38.5 per cent during the review period as compared with 36.2 per cent recorded in Q4 2021. As of July, the parallel market premium widened further to an average of 49.4 per cent, suggesting that CBN’s FX supply to the official windows has deteriorated further, with market participants patronising the unofficial markets for their dollar needs.
Furthermore, Nigeria’s FX reserve declined for the second consecutive week, decreasing by $133.52 million week-on-week (w/w) to $39.09 billion (04 August). Across the FX windows, the naira appreciated by 0.2 per cent and 8.3 per cent to N428.13/$1 and N660.00/$1 at the I&E window (IEW) and parallel market, respectively.
Analysts said that although the CBN has enough liquidity to support the FX market over the short term, foreign inflows were paramount for sustained FX liquidity over the medium term.