The naira appreciated by N2.85 against the United States dollar at the interbank arm of the forex market to close at N186.30 to a dollar on Wednesday, compared with the N189.15 to a dollar it was this week.
The performance of the nation’s currency was buoyed by an intervention by the Central Bank of Nigeria (CBN) in the interbank forex market. According to dealers, the central bank sold dollars towards the close of trading to boost liquidity.
The bank has been intervening almost daily in the interbank market since the start of the year as liquidity is very low due to depressed foreign investment as Nigeria’s economy has been hit by plunging oil prices.
The naira has remained under pressure as the price of oil, Nigeria’s main export has plunged. The currency has stayed well below a trading band of N160 to N176 to the dollar, set after the central bank devalued the naira by eight percent in November. Intervention to support the naira has also been aimed at curbing speculation.
In order to improve liquidity in the Bureau De Change (BDC) segment of the foreign exchange market, the CBN had on Tuesday, disclosed plans to conduct a special intervention in that segment of the forex market tomorrow.
Specifically, the banking sector regulator said it will sell $30,000 each to interested BDCs.
It had stated: “This is to inform all licenced BDC operators that in order to improve the liquidity in the BDC segment of the foreign exchange market, the CBN will be intervening in the market by selling $30,000 to interested BDCs on Friday, February 6.”
JP Morgan analysts had placed Nigeria on a negative watch for the next three to five months following reservations over the country’s foreign exchange position and the bond market which was described as illiquid.
The media quoted dealers to have said Italian oil company ENI was also in the market on Wednesday as it sold $24 million to some banks.
The CBN recently said it is also considering halting the sale of dollars for imported goods that are already manufactured in the country to reduce pressure on the naira hit by a drop in oil prices.
“The only thing that will reduce pressure on our currency is by producing those things we are importing today,” CBN Governor, Mr. Godwin Emefiele said.