Forex Alert: CBN buys $190M to slow Naira’s rapid rise

The Central Bank of Nigeria (CBN) has started buying US dollars from the market to slow down the rapid rise of the naira.

Last week, the CBN bought about $189.80 million to reduce excess dollar supply and control how fast the naira was gaining value.

The naira had been rising quickly at the official foreign exchange window. However, it slightly dropped during the last three trading days that ended on Friday.

Some financial experts warned that if the naira continues to rise too fast, foreign investors may pull their money out of Nigeria’s fixed-income market. If they sell their investments, it could increase demand for US dollars and lead to more dollar outflow from the economy.

To prevent possible market instability, the CBN stepped in by buying dollars — something it has not done in a long time.

According to a report by TrustBanc Financial Group Limited, the currency strengthened in both the official and parallel markets last week.

At the official market, the naira gained N9.09, closing at N1,346.32 per dollar.

At the parallel market, it appreciated by N60, closing at N1,340 per dollar.

The gap between the official and parallel exchange rates reduced sharply to 0.47%, compared to 3.29% the previous week. This shows that the two markets are becoming more aligned.

Analysts also said higher oil prices, increasing foreign reserves, and ongoing economic reforms are helping to keep the naira stable despite global uncertainties.