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EXCHANGE RATE STABILITY: CBN’s forex intervention rises by 87% to $40bn in 2018

…Net forex inflow rises 33% in Q4’18

By Babajide Komolafe

In the bid to sustain its policy of exchange rate stability amidst sustained demand pressures, the Central Bank of Nigeria (CBN) increased dollar injections into the foreign exchange market by 87 percent to $40 billion in 2018.

CBN Governor, Mr Godwin Emefiele

Meanwhile net foreign exchange inflow into the economy rose by 33 percent to $12.01 billion in the fourth quarter of the year

These figures are contained in the CBN’s economic report for the fourth quarter of 2018 (Q4’18) released yesterday.

In the interbank market, the apex bank injected $6.36 billion, up by 12 percent from $5.6 billion in 2017. It disbursed $3.14 billion through swap transactions in 2018, up by 190 percent from $1.08 billion in 2017.

Dollar sales to bureaux de change (BDCs) rose by 126 percent to $9.44 billion, from $4.18 billion in 2017. Similarly, dollar sales through forwards transactions rose by 52 percent to $15.97 billion from $10.54 billion in 2017.

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The report however showed that foreign exchange intervention of the CBN declined by 16.1 percent to $9.18 billion in the Q4’2018 from $11.88 billion in Q3’18.

The report stated said: “A total of $9.18 billion was sold by the CBN to authorised dealers in the fourth quarter of 2018. This represented 16.1 per cent decline below the level in the third quarter of 2018, but was 80.6 per cent above the level in the corresponding period of 2017. The development, relative to the preceding quarter reflected the decline in inter-bank sales and swaps transactions in the review quarter.”

Net forex inflow

However, net foreign exchange inflow through the economy rose by 33 percent to $12.01 billion in Q4’18, from $9.09 billion in Q3’18.

Providing details of foreign exchange inflow and outflow through the CBN and the economy in Q4’18, the report said: “Aggregate foreign exchange inflow into the economy amounted to $27.64 billion at end-December 2018, indicating an increase of 2.8 per cent and 7.1 per cent, above the levels in the preceding quarter and the corresponding period of 2017, respectively.

The development was as a result of the 12.3 per cent increase in inflow through the Central Bank of Nigeria. Oil sector receipts, which accounted for $3.02 billion, indicated a decrease of 14.5 per cent below the level at the end of preceding quarter but an increase of 9.2 per cent above the level at the end of the corresponding period of 2017.

Non-oil public sector inflow, at $11.49 billion (41.6 per cent of the total), rose by 22.5 per cent above the level at the end of the third quarter of 2018, but declined by 0.6 per cent, below the level in the corresponding period of 2017. Autonomous inflow, at $13.13 billion, fell by 6.1 per cent and 14.8 per cent below the levels at the end of the preceding quarter and the corresponding period of 2017, respectively. Inflow from autonomous sources accounted for 47.5 per cent of the total.

“Thus, foreign exchange flows through the economy resulted in a net inflow of $12.10 billion in the review quarter, compared with $9.09 billion and $20.54 billion in the preceding quarter and the corresponding period of 2017, respectively.”

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