Market News
CBN Injects $50m to Tame FX Volatility As Reserves Hit $41.08bn - DAILY TIMES
The Central Bank of Nigeria (CBN) stepped up its intervention in the foreign exchange market last week, selling $50 million to authorised dealer banks to stabilise the naira amid rising dollar demand.
The injection came as the local currency faced renewed volatility pressures, with the naira sliding to N1,535.03 per dollar at the official window by week’s close, down by N2.52 from N1,532.51 recorded at the beginning of the week.
The move helped smoothen intermittent swings in the FX market, restoring some confidence among traders. The market also drew support from fresh foreign portfolio inflows following the CBN’s Open Market Operations (OMO) auction.
Significantly, Nigeria’s gross external reserves climbed to their highest level in nearly three years, increasing by $353.47 million week-on-week to $41.08 billion, a level last seen in December 2021. The reserves’ rebound is being interpreted as a confidence boost, underlining the CBN’s capacity to defend the naira.
Despite the intervention, forward market data showed lingering pressure on the local currency, with contracts across tenors reflecting mild depreciation. The one-month forward fell by 2 basis points to N1,577.40/$, while the three-month weakened by 0.10 per cent to N1,653.75/$. Similarly, the six-month contract slipped to N1,763.94/$, and the one-year tenor closed at N1,975.62/$.
Market analysts said the forward trend suggests expectations of further weakness in the naira in the medium term, though they note that strong inflows could cushion the downside.
Cordros Capital Limited observed that the local currency remains underpinned by stronger FX liquidity and improved market efficiency. “We expect sustained inflows from foreign portfolio investors due to existing carry-trade opportunities and stronger confidence in the market. Additionally, improving non-oil exports and limited incentives for naira speculation should reinforce steady inflows from domestic sources,” the firm stated.
Other analysts polled by MarketForces Africa noted that the currency outlook hinges on the CBN’s ability to maintain liquidity injections and deepen reforms to sustain investor participation. For now, interventions alongside swelling reserves have tempered the worst of the volatility, but the naira still faces pressure in forward trades.
With external reserves climbing and dollar inflows firming, market watchers say the central bank’s policy stance in the coming weeks will be crucial in determining whether the naira consolidates at its current level or slides further.
