Forex: CBN pumps $2.3bn to crash Dollar rate

By Omodele Adigun

As the Dollar plunged below N380 from N520 at the black market under two weeks, statistical analysis has shown that the feat cost the Central Bank of Nigeria (CBN) $2.31billion in foreign exchange (forex) interventions last month.

This is coming to light as the apex bank last Friday auctioned $418 million at N310 per Dollar as another round of forex intervention to boost critical sub-sectors such as the airlines, agriculture, petroleum and raw materials/machineries.

This was in addition to the $350 million sold at wholesale auction, BTA/PTA, and school fees during the week.

According to CBN’s acting Director of Corporate Communications, Mr Isaac Okorafor, these significant forex injections “should reassure all foreign exchange users of the apex bank’s determination to continue to meet all legitimate demand in the market while striving to achieve exchange rate stability in the economy.”

However, Daily Sun analysis shows that between March 5 and 30, the apex bank took drastic steps to intervene in the forex market by injecting $2.31billion in both the wholesale and retail end of the market.

It all started with a circular by its Director of Financial Markets Departments, Dr Alvan Ikoku, directing all banks “to open a teller point for retail forex transactions, including buying and selling, in all locations in order to ensure access to foreign exchange by customers and other users without any hindrance,” and that “all banks must have an electronic display board in all their branches; showing rates of all trading currencies, that customers must insist on processing forex transactions based on the displayed rates.”

He added that the “banks are mandated to process and meet the demand for Travel Allowances (PTA/BTA) by end-users within 24 hours of such application, as long as the end-users meet basic requirements already outlined in earlier directives; and banks are mandated to process and meet demands for school fees and medical bills within 48 hours of such application”.

He warned that.the directive “takes effect immediately, and non-compliance would attract sanctions, including but not limited to being barred from all future CBN foreign exchange interventions.”

This was followed by $367 million forex intervention on March 6. A breakdown of the shows that over $144.07 million was for 45 days forwards, while more than $223.06 million was for 60 days.

CBN had argued that the move was in line with the bank’s determination to ease the foreign exchange pressure on various sectors through forward sales under the new flexible forex regime to keep the market liquid.

A day later, it pumped $100million into the market to flood the commercial banks with enough forex to cater for the request of customers to meet personal travelling allowance (PTA), basic travelling allowance (BTA), medicals and tuition fees.

But March 20 saw another $180 million intervention,  with $80million for invisibles. The bank explained that it offered the  $180 million to meet bids for wholesale auction and requests for invisibles such as medicals, school fees and personal travel allowances valued at $80 million, through the inter-bank window.

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