The Central Bank of Nigeria (CBN) recorded its highest dollar sales in a single month for 2024 in May as it sold $575 million.
According to data from FMDQ Securities Exchange, this dollar sale exceeds the combined total of the previous two months, with $151 million sold in April and $189 million in March.
The May figure underscores the CBN’s intensified efforts to prop up the naira and ensure market stability.
Liquidity in Nigeria’s foreign exchange market has significantly dipped due to ongoing instability in the exchange rate and persistent inflation, which has deterred foreign investors.
The total market turnover for May (excluding the 31st) was $5.89 billion, a notable decrease from $9.12 billion in April and $12.6 billion in March.
“The CBN had to intervene in the market last week to prop the naira, given that dollar liquidity has been low,” said a source familiar with the matter.
The CBN’s intervention included selling $98 million on Monday, $126 million on Tuesday, and a single-day high of $141 million on Wednesday, marking its busiest week in terms of dollar sales in nearly a year.
Despite this aggressive intervention, the naira’s volatility persisted. After an initial jump to a one-month high of N1173 per USD, the naira ended the week weaker, closing at N1485.99 on Friday, May 31, compared to N1482.81 the previous week.
The CBN’s actions are part of a broader strategy to manage naira liquidity and inflation. By selling foreign exchange, the CBN also aims to mop up excess naira liquidity from the market, a tactic employed alongside Open Market Operations (OMO).
“Provision of foreign exchange is critical to stabilize the naira and control inflation,” explained a market analyst. “Selling dollars into a liquidity-starved market helps manage the exchange rate and curb inflationary pressures.”