The Central Bank of Nigeria (CBN) sold foreign exchange amounting to $19.91billion to authorised dealers between January and October last year, findings by New Telegraph show.
The figure is $12.60billion less than the $32.51billion that the regulator sold to authorised dealers in the corresponding period of the previous year.
With the sharp drop in price of oil, the commodity that accounts for about 90 per cent of the country’s export earnings, coupled with the coronavirus (Covid-19) crisis, which led to a significant decline in external reserves, thereby limiting the amount the regulator could inject into the forex market to defend the naira, New Telegraph’s analysis of the apex bank’s forex data actually shows that with the exception of Q1’20, its forex sales to authorised dealers, last year, were below amounts sold for similar periods in 2019.
For instance, in its October 2020 monthly economic report released a few days ago, the CBN stated: “Provisional data showed that in October 2020, total foreign exchange sales to authorised dealers by the bank amounted to $1.56 billion; an increase of 17.6 per cent from the level in the preceding month, but a decline of 50.8 per cent below the level in the corresponding month of 2019.
“The development, relative to the preceding month, was attributed, largely, to increased matured swap transactions, which rose to $0.12 billion from $0.01 billion in September 2020. Similarly, foreign exchange cash sales to Secondary Market Intervention Scheme (SMIS) and Bureaux De Change (BDC) rose by 18.7 per cent and 23.9 per cent respectively to $0.65 billion and $0.42 billion in the review period, respectively.
A further disaggregation showed that sales to interbank, Investors and Exporters’ (I &E) and SME respectively fell by 37.6 per cent, 10.2 per cent and 11.8 per cent to $0.23 billion, $0.20 billion and $0.08 billion, relative to their levels in the preceding month.”
Similarly, in its 2020 Half Year Economic Report, the apex bank had stated: “The precautious level of economic activities hampered foreign exchange supply to authorised dealers.
Total foreign exchange supply to authorised dealers by the bank stood at $13.98 billion, indicating a decline of 15.3 per cent each, below the levels in the preceding half year and the corresponding half of 2019, respectively. “Of the total, inter-bank sales amounted to $0.38 billion, compared with $0.62 billion and $0.81 billion in the preceding six months and the corresponding period of 2019, respectively.
At the Bureaux De Change (BDC) segment, total sales declined to $3.63 billion in the review period, compared with $6.75 billion and $6.86 billion in the preceding half year and corresponding period of 2019, respectively, due to the temporary suspension of sales to the segment as international travels were grounded.
“Foreign exchange sales under the Secondary Market Intervention Scheme (SMIS) and to Small and Medium Enterprises (SME) declined by 7.6 per cent and 31.0 per cent to $3.16 billion and $0.57 billion, respectively, from their levels in the preceding half year.
Sales to Investors and Exporters’ (I&E) window rose by 27.6 per cent to $6.24 billion, compared with the levels in the preceding six months and the corresponding period of 2019, respectively.” Indeed, given the downward trend in forex sales by the CBN between the end of March and October last year, analysts are predicting that total forex sales at the end of 2020 will be lower than the last few years’.
In its “Annual Activity Report 2019,” released recently, the apex bank had disclosed that it made total foreign exchange sales of $23.9billion in 2019 as part of measures to ensure exchange rate stability. The report showed that total forex sales in 2019, was $1.8billion less than the amount ($25.7billion) it sold in the previous year.
The regulator attributed the lower sales it made in the foreign exchange market in 2019, compared to 2018’s, to the increased level of activity at the I&E window. Specifically, the CBN said that in 2019, total forex sales stood at $23.9billion, comprising $13.1billion as spot and $10.8billion forwards.
According to the report, “the spot sales comprised $6,038.40 million at the I&E window, $4,267.16 million at the inter-bank, $1,674.00 million for SMEs and $1,123.10 million for invisibles.