Between January and June, net foreign exchange inflows increased by 55% year on year to $25.4 billion, according to the Central Bank of Nigeria (CBN).
Record inflows of diaspora remittances through official channels and an increase in capital importation – which hit $6 billion in June 2024 – have propelled this expansion.
The entire amount of foreign currency coming into a nation less the total amount of foreign currency going out over a given period is known as net foreign exchange inflows.
According to a CBN statement, “the CBN’s policy objectives are yielding tangible results and bolstering market confidence.”
Additionally, there are indications of improvement and deeper penetration in the foreign exchange market, with more stable and varied sources of liquidity supporting the ongoing convergence of currency rates in all market categories.
By the end of July 2024, the official market had registered a $43 billion turnover in client transactions, with less than 5% of all market activity coming from liquidity supplied by the CBN.
The CBN, as the top bank, has demonstrated its continued commitment to bolstering liquidity as needed to ensure the smooth operation of the foreign currency market by offering $876 million to satisfy bids made by clients at an auction that ended on Wednesday, August 7, 2024.
As part of its commitment to give all eligible clients transparent access to foreign exchange, the CBN’s leadership has added a second method – the Retail Dutch Auction System (RDAS) – to help with FX sales to end users.
This strategy seeks to promote price discovery, lessen information asymmetry, and increase market transparency. It is an addition to the two-way quote system that has been used in recent months to improve interbank market liquidity, allowing for the sale of over $305 million in foreign exchange to approved dealers in the last three weeks.
The statement said, “The CBN will continue to strengthen the market’s capacity to meet the needs of all legitimate participants. It remains steadfast in its commitment to fostering a transparent, market-driven foreign exchange market.”
