CBN Doles Out $26.6Bn to Defend the Naira

Central Bank of Nigeria (CBN) shelled out some $26.6 billion from the nation’s external reserves to save the naira from devaluation last year, according to information on the apex bank’s website.

CBN consequently sold about $26.6billion to currency dealers in 94 Foreign Exchange Dutch Auctions between January and December 2013.

The apex bank also sold about $19.8billion to currency dealers in 72 auctions through the Wholesale Dutch Auction System between January and September last year, while it offered $6.8billion to the dealers in 22 auctions through the Retail Dutch Auction System between October and December.

The CBN had on October 2 last year replaced the WDAS with the RDAS because of the ineffectiveness of the former in order to address hitches in the foreign exchange market.

The data showed that the central bank sold the highest amount of dollar in the month of July, offering $3.3billion; while it sold $833,501,279 in January, the least for the year

The bank also offered to the public $2.8 billion in the month of September, making it the second highest in the year, while it offered a total of $2.38 billion in the month of October.

The CBN statistics showed that $1.2 billion was sold in February, while $1.9 billion was sold in March. It further showed that the central bank sold $2.4 billion in November and $1.99 billion in December.

However, the BGL Plc, an independent firm, estimated that the CBN sold about $25.591 billion during at its bi-weekly auctions in 2013.

The amount ranged from $12million (in the early part of the year) to $400million towards the end of the year.

The Punch newspaper reported that the lower demand at the early part of the year was due to high foreign portfolio inflows into the country for investment in bonds and later equities, analysts  said.

According to The Punch, other analysts linked the trend to the fact that the naira did not experience much pressure during the early part of last year compared to the later period.

According to the CBN, the official exchange rate in January of last year was N155.77 to the dollar, while the rate currently is N155.70 to the dollar.

Industry observers said although there was a little volatility during the year, the rate was relatively stable.

A note by the BGL reads, “The CBN defence of the naira in 2013 was successful although to the detriment of the external reserves. Foreign investors were sufficiently protected, while genuine importers also got a good bargain from the CBN.”

The reserves started last year at a little above $44 billion and rose to $48 billion in May. They, however, closed the year at $43.6bn on December 31.