The Central Bank of Nigeria (CBN) injected $543.5 million into the Nigerian foreign exchange market between September 6 and 30 to address currency volatility. The bank attributed the volatility to high import demand and seasonal factors. Nigeria is facing a foreign exchange shortage and the government has taken several measures to combat the situation, including restricting foreign currency withdrawals and considering selling oil in local currency.

Seasonal Dollar Demand Weakens Naira

Between September 6 and 30, the Central Bank of Nigeria (CBN) sold $543.5 million to authorized dealers to support the country’s volatile currency. The bank’s director of financial markets, Omolara Duke, said in a statement that the CBN sold foreign currency on 11 separate occasions at exchange rates ranging from NGN1,530 to NGN1,605 to the dollar.

Duke said the CBN injected the most foreign currency into the market on September 26, selling $80 million. Three days earlier, the bank sold the least amount of dollars in a month: $17.5 million.

Commenting on the sale of spot foreign exchange to approved financial institutions, Duke said:

The FX spot sales are aimed at reducing market volatility observed due to commodity import demand and seasonal demand for FX. The value date for all transactions is T+2. The CBN will continue to facilitate FX supply into the Nigerian Foreign Exchange Market (NFEM) as part of its comprehensive FX Management strategy.

The CBN’s disclosure of the amount of US dollars injected into the Nigerian market comes at a time when the country is struggling with a shortage of foreign currency, which the central bank has blamed on a surge in demand for the scarce commodity. To combat this, the Nigerian government has introduced a series of measures including limiting the amount of foreign currency residents can take out of the country.

According to a recent report by Bitcoin.com News, Nigeria has considered selling crude oil in local currency to ease pressure on the naira. However, recent reports suggest that the plan has yet to be implemented due to disagreements over pricing.

Nigeria has also introduced measures to restrict the operations of global cryptocurrency exchanges and crack down on illegal currency traders, but these moves have largely failed to stabilize the naira, which has lost more than 60% of its value in 2024.

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