The Central Bank of Nigeria (CBN) took two critical steps to bolster the naira’s performance against the dollarThe Debt Management Office (DMO) issued a $2.2 billion Eurobond recently, which was reportedly oversubscribed and helped to boost the naira’s performanceAlso, the CBN’s introduction of the Electronic Foreign Exchange Matching System helped to provide transparency in the FX markets
Henzodaily.ng’s Pascal Oparada has reported on tech, energy, stocks, investment and the economy for over a decade.
The Central Bank of Nigeria has taken key steps to stabilise the forex market by launching the Electronic Foreign Exchange Matching System (EFEMS) and the Debt Management Office issuing a $2.2 billion Eurobond.
These measures have boosted Nigeria’s FX reserves, providing the needed buffer to raise the naira.
Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso
Credit: Bloomberg/Contributor
Source: Getty Images
Why CBN introduced the EFEMS
In the past week, the naira has appreciated to about N1,500 per dollar from over N1,700.
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The EFEMs introduced by the apex bank aim to address discrepancies in the market, eliminate speculative trading, and enhance transparency.
Henzodaily.ng has detailed how the EFEMS helps stabilise the foreign exchange market by ensuring a more efficient allocation of FX.
The new platform is expected to curtail market volatility and boost confidence among market players.
This initiative adds to existing steps to stabilise the FX market, like policies aimed at curbing arbitrage and boosting supply.
Eurobonds boost FX reserves
Also, the $2.2 billion bond issuance by the DMO has infused foreign capital into Nigeria’s reserves.
The bonds’ proceeds serve as a booster to shore up the reserves, allowing the CBN to meet demands in the FX market more efficiently.
Financial experts have said that this move supports the naira and sends a positive message to international investors about Nigeria’s commitment to addressing its economic challenges.
Analysts have noted that this strategic move supports the naira and sends positive signals to international investors about Nigeria’s commitment to addressing its economic challenges.
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Diaspora remittances surge
Also, the structural steps introduced by the CBN and seasonal inflows have contributed to the naira’s recent gains against the dollar.
Analysts have said that remittances from Nigerians abroad have surged during this time of the year as expatriates send funds home or travel to celebrate with their families.
The dollar increase has also raised the FX market liquidity and eased pressure on the naira.
CBN crashes dollar for Customs duty
Henzodaily.ng earlier reported that CBN crashed USD for importers following the rise of the naira against the US dollar.
Information from the Customs trade portal shows that the apex bank reduced the FX rate for cargo clearance by N55 on Saturday, December 7, 2024.
The development means importers would pay N55 less to clear imported goods from Nigeria’s ports.
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Source: Henzodaily.ng