Market News

BY  Hope Moses-Ashike 

The Central Bank of Nigeria (CBN) has continued to take major steps to keep the naira stable in line with its exchange rate stability objective. The apex bank has intensified interventions in the market, boosting FX supply to retail end users, reducing distortions in the market and maintaining effective foreign reserves management and accretions.

The injection of liquidity into the market and rising compliance with FX regulations have reduced sharp depreciation of the naira at official and parallel markets and buoyed foreign investors’ interest in the domestic economy.

The timely interventions of the CBN through policy implementations and injection of liquidity into the forex market, effectively halted the naira slide and restored stability in the forex market.

Aware of its exchange rate stability mandate, the apex bank recently injected $360 million through authorised dealers into the market, which helped to mitigate a steeper devaluation amid the resurgence of demand pressures.

The official FX rate exchanges at N1,530/$, while the local currency exchanges at N1,570/$ at the parallel market on Monday. The CBN’s robust interventions, including last week’s selling of $360.00 million to authorised dealers have continued to help stabilise the naira.

The naira stability is also driven by inflows from Foreign Portfolio Investors (FPIs), substantial contributions from International Oil Companies (IOCs), and the CBN’s $18.40 million previous interventions to authorised dealers.

There is also renewed interest of Foreign Portfolio Investors (FPIs) in the FX market, driven by improved market confidence, a more efficient FX framework, and strengthening macroeconomic conditions.

Analysts at Cordros Research, said the gross FX reserves increased by $12.06 million week-on-week to $38.36 billion, after nine consecutive weeks of decline.

“Concerns about oil receipts underpinned by lower oil prices are likely to temper net FX inflows from Foreign Portfolio Investors, likely sustaining pressure on the naira. Nonetheless, CBN’s sustained market intervention and reduced market distortions are expected to prevent a sharp depreciation of the naira,” the report said.

Philip Sigwart, group CEO, Baobab Group said the Nigeria forex market has turned a corner, with stability allowing more companies to invest in the economy.

He disclosed that given the improved business confidence and stability in the forex market, his company will not only inject new capital into its operations, but lend more to businesses.

Sigwart, based in Paris, at the Boabab Group headquarters, spoke during a media briefing in Lagos. He said the volatility in the forex market that made it difficult for businesses to plan and invest, has been addressed, and now is the time to invest and expand its operations in Nigeria to at least 100 branches, targeting a N1 trillion balance sheet.

Many other stakeholders have applauded the CBN’s reforms that kept the exchange rate stable, and attracted a new wave of investment into the economy.

Aminu Gwadabe, president, Association of Bureaux De Change Operators of Nigeria (ABCON), attributed the ongoing stability of the naira against dollar and other world currencies to the CBN’s policies.

Gwadabe said key policies like the Foreign Exchange (FX) Code, rising investors confidence, and foreign direct investment supporting policies are effectively putting FX speculators in check.

He said the FX Code implementation is comprehensively addressing various aspects of market conduct and practices.

For instance, the policy authorises the CBN to establish and enforce directives regarding the standards for financial institutions under which FX deals are to be conducted.

Gwadabe said the code further entrenches transparency and accountability in the FX market, and continually sustains naira stability and rally.

He also backed CBN’s position that all institutions engaged in the foreign exchange market must also provide the CBN with detailed implementation plans outlining how they intend to achieve full compliance with the FX Code.

The plans are expected to be formally approved and signed by the institution’s board of directors, and it must be accompanied by relevant extracts from the board meeting where the plan was reviewed and endorsed.

Stevens Michael, CEO, Countryside Markets Limited, said: “For me, the whole idea is just to ensure that there is a lot more sanity in the foreign exchange market because certain characters have really created a whole lot of problems over the years in the foreign exchange market”.

“I think that is what the CBN is trying to do and the more we’re able to sanitise the markets, I think the more stability it will achieve in the foreign exchange market,” he said.

Olayemi Cardoso, governor of the CBN, had at the launch of the FX Code, emphasised integrity, fairness, transparency, and efficiency as critical pillars for driving Nigeria’s economic growth and stability.

He said that the FX Code was built on six core principles: ethics, governance, execution, information sharing, risk management and compliance, as well as confirmation and settlement processes.

These principles, he explained, aligned with international standards while addressing the unique challenges within Nigeria’s foreign exchange market.

According to Cardoso, “The FX Code represents a decisive step forward, setting clear and enforceable standards for ethical conduct, transparency, and good governance in our foreign exchange market. The era of opaque practices is over. The FX Code marks a new era of compliance and accountability. Under the CBN Act 2007 and BOFIA Act 2020, violations will be met with penalties and administrative actions.”

Besides the FX Code, the apex bank also introduced the Electronic Foreign Exchange Matching System (EFEMS), which has proven effective in other economies in enhancing the functionality of the foreign exchange market.

The EFEMS was meant to check forex market distortions, eliminate speculative activities and instil transparency. The EFEMS, which is commonplace in developed and developing markets offers real-time information on currency rates, trading volumes, and market activity.

The CBN lifted the 2015 restriction barring 41 items from accessing FX at the official market to enhance trade and investment.

These reforms and developments reflect the bank’s commitment to creating an enabling environment for inclusive economic development. However, achieving macroeconomic stability requires sustained vigilance and a proactive monetary policy stance.

CBN’s policies support remittances inflows

As part of its efforts to boost diaspora remittances and support naira stability, the CBN recently announced the introduction of two new financial products designed to serve Nigerians living abroad.

The Non-Resident Nigerian Ordinary Account and the Non-Resident Nigerian Investment Account was created to streamline remittances, encourage investments, and foster financial inclusion among Nigerians in the diaspora.

It said, “The Central Bank of Nigeria is pleased to inform the general public of the introduction of the Non-Resident Nigerian Ordinary Account and Non-Resident Nigerian Investment Account targeted at Nigerians in diaspora.”

The initiative is also expected to provide a secure and efficient platform for managing funds and investing in Nigeria’s financial markets.

Since the beginning of this year, eligible Non-Residents (NRNs) have continued to get the opportunity to own any of the Non-resident Nigerian accounts.

The Non-Resident Nigerian Ordinary Account was designed to facilitate remittances by allowing non-resident Nigerians to remit foreign earnings into Nigeria and manage funds in foreign currency or naira.

Deposits from sources such as salaries, allowances, and dividends are supported, alongside spending on family maintenance, education, and healthcare.

On the other hand, the Non-Resident Nigerian Investment Account provides an opportunity for NRNs to invest in Nigeria’s financial markets, including foreign currency-denominated bonds, fixed deposits, and local assets like equities, government securities, and mortgage products.

The CBN explained that both accounts offer currency flexibility, enabling holders to maintain balances in either foreign currency or naira.

Account holders will also be able to convert funds between the two currencies at prevailing exchange rates through authorised dealers.

The Non-Resident Nigerian Investment Account, in particular, was structured to promote investments in Nigeria’s financial instruments, such as the Diaspora Bond, and encourage active participation in the country’s economic development.

The CBN said the introduction of these accounts will harness the economic potential of Nigerians in the diaspora by boosting remittances and fostering investments in critical sectors.

These and other measures include granting licenses to new International Money Transfer Operators (IMTOs), implementing a willing buyer-willing seller model, and ensuring timely access to naira liquidity for IMTOs.