CBN Defends Naira With $18.7bn

The Central Bank of Nigeria has defended the naira with $18.7bn at the Wholesale Dutch Auction System between April and November 4 in a bid to save the currency, an investigation by newsmen has shown.

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Calculations from data obtained from the CBN website on Thursday showed that the bank offered $18.7bn to currency dealers in 59 auctions in the seven-month period.

The data showed that the central bank sold the highest amount of dollars in the month of July, offering $3.3bn, the highest in the year.

The CBN had in July hiked the cash reserve requirement for public sector deposits to 50 per cent from 12 per cent in a bid to tighten liquidity and shore up the value of the naira, but has failed to stem the currency’s decline.

Prior to that, in June, the naira declined 0.4 per cent to N159.45 per dollar, hitting the highest since September 24, 2012.

The data also showed that the bank offered to the public $2.8bn in the month of September, making it the second highest in the year, while it offered a total of $2.6bn in the month of October.

However, the CBN on October 2, replaced the WDAS with the Retail Dutch Auction System because of the ineffectiveness of the former in order to address hitches in the foreign exchange market.

The Head, Global Research Africa, Standard Chartered Group, Ms. Razia Khan, said the WDAS was abused because it allowed banks to collate bids for clients and make a single forex bid.

However, under the RDAS, banks will place bids for clients who qualify to buy forex at the official auction.

“This change will allow the authorities to monitor more accurately various sources of forex demand and any potential duplication of forex demand in the system. Banks will remain responsible for all documentation requirements,” she added.

Newsmen gathered that the CBN had, in a couple of months back, resumed direct intervention by selling dollars to end-users in the market.

It was gathered that the regulator took the decision in order not to devalue the naira.

There had been speculations that the CBN would devalue the naira, thereby fuelling an excessive demand for the dollar.

A reliable source in the CBN had told newsmen that “The CBN has resumed intervention by selling dollars to end-users. The bank has a dealing whereby it sells to the WDAS, but very rarely sells to end-users directly.

“If the market is tight, it can sell or buy from end users, but it is uncommon. The implication is to increase supply and make the naira appreciate.”

The CBN Governor, Mr. Lamido Sanusi, had said that he would do everything possible to defend the naira and ensure its stability, including using the nation’s foreign reserves to achieve the purpose.

 

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