Exchange Rate CBN releases $180 million to ease dollar shortage

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The fund was released to satisfy demand for the dollar and boost liquidity in the foreign exchange market.

Central Bank of Nigeria play

Central Bank of Nigeria

(thesheet)
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The Central Bank of Nigeria has pumped an additional fund of $180 million into the forex market.

The intervention fund was released in two parts; a sum of $80 million allocated for Personal Travel Allowance, school fees and medicals, and $100 million which will make its way into the wholesale forwards market.

According to the CBN's Acting Director of Corporate Communications Department, Isaac Okoroafor, this is consistent with the bank's goal to increase liquidity in the forex market.

In his words, “In keeping with its determination to increase liquidity in the foreign exchange market, the Central Bank of Nigeria (CBN) has released another $100 million into the wholesale forwards segment of the market and pumped an additional $80 million into the banks specifically for the settlement of dollar demand for school fees, medicals and Personal Travel Allowance (PTA), among others".

play The naira hit a low of 540 naira against the dollar in the parallel market. (Guardian)

 

“The commitment to providing enough forex for legitimate business remains unshaken and we will do everything possible to ensure the steady supply of forex to the market,” he said.

The CBN's intervention is in keeping with its recent efforts to strengthen the naira.

Just last week, it intervened by releasing $500 million into the market. The effect was almost instant with the naira gaining over 85 naira against the dollar in the space of few days.

Since the early days of this administration, the naira has traded at differing rates in various markets. Many have questioned this model and the CBN's policies; especially as the apex body suggested that the parallel rate was affected by hoarding and illegal forex trade.

The present intervention seems to be yielding results; the naira is in its fourth day of consistent gains against the dollar. There is little indication that this will stop in the coming days.

Still, there are fears regarding the implications of supporting the currency by releasing forex at will. Many worry that the naira will weaken when the CBN can no longer intervene in this manner.