The foreign exchange market gulp $4.37bn in the third quarter of 2020 as one of the moves by the Central Bank of Nigeria (CBN) to stabilize the naira.
The third-quarter economic report of the apex bank revealed that the CBN’s periodic interventions in the forex market is targeted at boosting the supply side of the market.
Since the outbreak of COVID-19 pandemic, the private sector supply chain segment of the market has been weakened.
“During the third quarter of 2020, total foreign exchange sales to authorised dealers by the bank amounted to $4.37bn, a decline of 2.3 per cent from the level in the preceding quarter,” part of the report says.
It noted that the decrease in wholesale forward intervention and interbank sales imparted the foreign exchange.
The total foreign exchange sales represented a decrease of 56.4 per cent, compared with the corresponding quarter of 2019, CBN says.
“Further disaggregation showed that matured swap transactions and SMIS intervention rose by 50.8 per cent and 0.7 per cent to $1.24bn and $1.96bn, from the levels in the preceding quarter.
“However, interbank sales, interventions at the I&E window and SME fell by 22.3 per cent, 18.7 per cent and 3.5 per cent to $0.15bn, $0.39bn and $0.30bn relative to their levels in the preceding quarter.”
Foreign Exchange sales to BDC
It disclosed that it sold $0.33billion in foreign exchange to Bureau de Change (BDC) operators in the review period.
It also says that it sustained interventions in the forex market to the BDC operators to boost liquidity and ease demand pressure.
Recall that the exchange rate of the naira against the dollar was further adjusted during the review period from N361/$ to N381/$.
Fight against abuse of forex
The apex bank introduced a few measures aimed at curbing abuses and ensure prudent use of forex.
It directed all authorised dealers to desist from opening Forms M with payments routed through third parties.
The policy was aimed at eliminating occurrences of over-invoicing, transfer pricing, double handling charges and avoidable costs, which were ultimately passed on to Nigerian consumers.
Domiciliary accounts of companies that indulge forex abuse were blocked for investigation.
It promised to sustain the policy in order to build a stronger naira.
At the time of this report, the CBN dollar to Naira exchange was N395.5/$1 while it’s N470 to 1 USD in the blackmarket rate.