The naira depreciated to its worst level in four months to N1, 609.29 against the dollar on Friday, July 26, a few days after the Central Bank of Nigeria raised the benchmark interest rate.
At its two-day monetary policy committee meeting on Tuesday, July 23, the CBN tightened the monetary policy pool and hiked the benchmark interest rate to 26.75 per cent from 26.25 per cent in May.
This is the fourth consecutive time the apex bank has raised the monetary policy rate to rein in inflation which surged to 34.19 per cent in June.
The rate hike has failed to lessen inflationary pressure which inadvertently is affecting Nigeria’s currency market, with the naira becoming a weaker store of value by the day.
For instance, at the official Nigerian Autonomous Foreign Exchange Market window, the naira closed at closing at N1, 609.29 to the dollar on Friday, July 26 compared to the N1, 500.32 it closed on Monday, July 22 when the apex bank commenced its MPC meeting.
On Tuesday, July 23 when it ended its meeting, the naira worsened to N1, 548.76 to the dollar, to N1, 586.71 on Wednesday, July 24, and to N1, 603.80 on Thursday, July 25.
A check by The Point shows that the last time the dollar traded above N1,600 to the dollar was on March 15 when the naira depreciated against the dollar at N1,602.75.
The depreciation of the naira to a four-month low came after the CBN announced its intention to defend the naira over the next few weeks.
The apex bank had on Friday, July 19, said it had commenced a regular intervention in the country’s foreign exchange market to quell the large demand pressure from corporate entities and the expected seasonal uptick during the summer period.
“Recent movements in the forex market are largely driven by demand pressure from corporate entities and the expected seasonal uptick during the summer period.
“Over the next few weeks, the CBN will continue to support various segments of the official markets with liquidity,” the apex bank said.
According to the CBN, its intervention in different segments of the market is in line with its price stability mandate and commitment to ensuring a well-functioning and liquid market.
“The rate hike has failed to lessen inflationary pressure which inadvertently is affecting Nigeria’s currency market, with the naira becoming a weaker store of value by the day.”
In the last three weeks, the apex bank had sold $229.17 million to authorised dealer banks between an exchange rate range of N1, 480 above to a dollar.
It also sold $20,000 to each of the eligible Bureaux De Change operators to avert market distortion in the Nigerian foreign exchange market.
Central Bank of Nigeria on Friday, disclosed that it sold a total of $148 million to Authorised Dealers Banks in the Nigerian Foreign Exchange Market to provide liquidity to the segment.
In a statement, CBN acting Director, Corporate Communications Department, Mrs. Hakama Sidi Ali, underscored the transparency of the apex bank’s operations.
She said transactions were conducted on July 22 and 23, 2024, adding that the central bank sold Foreign Exchange to 29 ADBs at exchange rates of between N1470.00/$1 and N1510.00/$1.
Sidi-Alli also stated that the value dates for all transactions conducted on July 22 and 23, 2024, were T+0 and T+1 for sales at the later part of each day.
CBN also sold a total of $106. 5 million to 29 ADBs at rates between N1, 498.00/$1 and N1, 530.00/$1 on Thursday, July 18 and Friday, July 19, 2024.
She, however, reiterated the commitment of the CBN Governor, Olayemi Cardoso towards stabilising the foreign exchange market.
According to the CBN director, the governor had assured that the bank will continue to address the supply gap to ensure market stability.
