Spot Exchange Rates Diverge as Nigeria CBN Sells $471 Million in 7 Days
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The Nigeria's foreign exchange market has experienced notable fluctuations recently as the Central Bank of Nigeria (CBN) injected close to half a billion dollars which is around $471 million into the market over a seven-day period, creating a widening gap between exchange rates across different market segments. The CBN's substantial forex intervention of $471 million to authorized dealers was implemented to enhance liquidity and stabilize the naira amid ongoing foreign exchange demand pressures as trump tariffs are still been responded by various nation trying to stabilize thier economy, This strategic move comes at a critical time when the national currency has been facing significant challenges.
The central bank executed these sales at varying rates, which has contributed to an expanding disparity between official and parallel market exchange rates, while the official market maintained relative stability, the parallel market continues to show the naira trading at considerably weaker rates especially in the otc and the p2p market which has significantly Impacted volatility on Exchange Rates, these injection provided some temporary relief, particularly benefiting manufacturers and importers who access forex through official channels. However, persistent dollar demand continues to exert downward pressure on the naira, especially in the black market where further depreciation has been observed, and Market analysts point out that the growing divergence between official and unofficial rates highlights ongoing forex supply inadequacies, despite the CBN's interventions by introducing new tools and policies for maintaining the stability of the currency it has also widening gap which creates opportunities for round-trip ping a practice where traders exploit rate differences for profit potentially undermining the central bank's stabilization efforts.
Market Reactions and Outlook
The financial community has shown divided opinions regarding the CBN's intervention strategy as some experts praise the bank's efforts to increase market liquidity, while others argue that more sustainable forex supply mechanisms and fundamental economic reforms are necessary for long-term exchange rate stability as the injection is only to a particularly sector which doesn't provide a balance spread of liquidity in all sectors forcing a tragetory demand from importers and other SME businesses. The CBN continues to prioritize critical economic sectors including agriculture, manufacturing, and healthcarein its forex allocation strategy. However, with Nigeria's foreign reserves under increasing strain due to reduced oil revenues and growing external financial obligations, questions remain about the sustainability of these interventions as history has proven they are not as effective as the result been expected At the Nigeria Foreign Exchange Market (NFEM) window, the naira depreciated by 1.78% to N1,629, CardinalStone Partners Limited said in an update. At the parallel market, the naira depreciated by 4.32% to N1,638.40 per US dollar over surging demand, reversing previous trend. At the FMDQ FX window, the naira appreciated by 0.93% to settle at N1616.88/$. The CBN provided some supply to the FX market, selling $149.4 million at the range of N1,603.11/$ – N1,620.00/$ while rate in the p2p market is currently trading at 1608/$- 1615$, only bybit p2p platform
In Conclusion
The recent $471 million forex injection illustrates the persistent challenges facing Nigeria's foreign exchange market. While providing immediate liquidity, the continuing divergence between market rates indicates deeper structural issues that require comprehensive policy solutions.
Industry stakeholders and market participants are closely monitoring the CBN's future actions, as additional interventions or policy adjustments may be required to effectively stabilize the naira and rebuild confidence in Nigeria's forex market.