Naira steady as CBN sells treasury bills to support currency

The Nigerian currency, Naira, over the weekend, steadied at 390 to a dollar at the parallel market, even as the Central Bank of Nigeria (CBN) sold short-term naira Treasury bills at yields above inflation rate of 7.8 per cent on Friday.

The Naira retained ground at the parallel market on Friday with slight changes in the closing rate compared to N389.2 per dollar exchanged on Thursday at the unofficial market.

Also, the currency, which had depreciated at the Investors and Exporters FX window Spot from 382.64 to 383.19 on Thursday, rebounded to close at a new rate of 382.19 from 382.69 opened on Friday.

The local currency at the official spot window remained unchanged at 305.7, the same rate it traded on Thursday from depreciated rate of 306.25 sold on Wednesday. However, it remained stable at the Bureau De Change (BDC) window, where the naira was sold at N362 to the Greenback.

Consequently, foreign exchange dealers believed that the apex bank is supplementing a run of dollar sales in a two-pronged effort to prop up the ailing local currency.

They opined that Treasury bill sales to support the currency is draining some of the cash in the market, thereby making the naira slightly stronger against the dollar.

It would be recalled that after introducing a complex multi-tiered exchange rate system, the apex bank has been injecting forex in the market since February to prop up the naira.

It has sold more than $4 billion on the spot and forward currency markets and had in recent months been offering high yields to attract investors to its one-year debt.

On Friday, the CBN sold N18.88 billion in one-year treasury notes at 18.6 percent, a premium to annual inflation that stood at 17.26 percent in March. It issued N200 billion in bills the previous day and 230.60 billion on
Wednesday, also at high yields.

The central bank embarked on aggressive liquidity mop-up this week … leaving banks scrambling for available cash in the system,” one trader told Reuters.

The bank sold dollars to lenders from Monday to Thursday to soak up naira, but none on Friday, traders said.

The bank’s actions drove lenders to borrow from its discount window to cover their position after overnight rates hit 53 percent at Friday’s open before falling back to 19 percent.

Meanwhile, the apex bank has explained that the ban it placed on 41 items that are not eligible for foreign exchange is still in place as the policy has not been reversed.

A statement by the CBN Ag. Director, Corporate Communications, Isaac Okorafor, said that media reports indicating otherwise are false.

“The CBN has not reversed its policy on the 41 items ineligible for forex through the Nigerian forex market.

“The reports appear to be a misinterpretation of our circular titled, ‘Revised Documentation Requirements For Allocation of Foreign Exchange for Small-Scale Importation’, dated May 03, 2017, to the effect that importers of items classified as ‘ineligible for Forex’ with transactions value of $20,000 and below per quarter shall now qualify for allocation of foreign exchange subject to the completion of form Q.

“This provision does not refer to the 41 items that remain ineligible for forex sale in the Nigerian forex market,” Okorafor said.