CBN interventions fail to save naira, now exchanges N1600/$

Maureen Aguta

Despite recent efforts by the Central Bank of Nigeria (CBN) to stabilize the exchange rate through the reintroduced retail Dutch Auction System (rDAS), the naira remains under significant pressure. The dollar continues to exchange at approximately N1, 600/$ in the unofficial market, highlighting ongoing challenges in the foreign exchange market.

The CBN auctioned $876 million through rDAS on August 7, 2024, and previously sold $106.5 million to 29 authorized dealer banks between July 18 and July 19, 2024, with rates ranging from N1,498.00/$1 to N1,530.00/$1. The CBN also purchased $9.5 million from banks at rates between N1, 510/$1 and N1, 550/$1. Despite these interventions, the naira has not shown significant appreciation.

The apex bank reported an increase in foreign exchange market depth, with a turnover of $43 billion in customer transactions by the end of July 2024. However, the CBN-supplied liquidity accounted for less than five percent of market activities, indicating limited impact.

Experts are divided on the prospects for the naira. Retired banker Ande Mohammed is cautiously optimistic, suggesting that as inflation pressures ease, the naira could gain strength, though he cautions that the recovery may be slower than desired.

Investment banker Tolulope Alayande views the increase in food imports as a complex issue. While import-free status for food could lower prices, it may also exacerbate the naira’s weakness. The increase in food importation could strain the country’s foreign exchange reserves, presenting an opportunity cost that could further challenge the naira’s value.

The CBN’s ongoing efforts to promote stability and ethical conduct among authorized dealer banks aim to address these challenges. Despite these measures, the exchange rate crisis persists, and the market remains closely monitored as the country navigates its economic difficulties.