According to the annual activity report of the Central Bank of Nigeria (CBN), the bank spent a total of $17.81 billion on interventions in the inter-bank foreign exchange market in 2022. This amount is higher than the $16.55 billion injected in 2021. The CBN’s interventions were aimed at maintaining stability in the exchange rate.
The report also revealed that Nigeria’s external reserves decreased by $2.85 billion in the first half of 2023 due to challenges such as external debt financing and lower oil production resulting from oil theft. The decrease in foreign exchange supply necessitated additional interventions from the CBN.
Out of the total amount sold, $7.12 billion was distributed in the spot market, while $10.69 billion was distributed in the forward market. The spot sales included $2.46 billion at the I&E Window (NAFEX market), $1.43 billion at the inter-bank market, $1.60 billion for SMEs, and $1.63 billion for invisible transactions.
On the other hand, the CBN purchased $2.17 billion at the inter-bank market. Consequently, the net sales by the bank amounted to $15.64 billion. In the forward market, $13.53 billion matured, leaving $8.31 billion outstanding as of December 2022.
The continuous interventions by the CBN have contributed to the depletion of Nigeria’s reserves, which decreased from $40.53 billion as of December 31, 2021, to $34.22 billion as of June 26, 2023. Analysts predict that there will be fewer intervention funds in 2023 due to the recent exchange rate unification, which has halted the sales of foreign exchange at the interbank market.
However, if future interventions are required, the expected increase in foreign exchange supply, coupled with the CBN’s commitment to maintaining a managed floating regime, should help mitigate the need for extensive interventions.
The CBN’s figures on movement in foreign reserves showed a decline from $37.09 billion as of December 29, 2022, to $34.22 billion as of June 26, 2023, after starting the year at $37.07 billion. In 2022, the reserves decreased by $3.43 billion from $40.52 billion as of December 31, 2021.
