The Central Bank of Nigeria has commenced the direct sale of United States dollars at the inter-bank market.

According to the apex bank, the direct sale of forex to authorised dealers took effect from Friday. It explained that the initiative was aimed at stabilising the naira.

The bank said it would intervene in the inter-bank market to either buy or sell, noting that interested dealers in the intervention were to submit their bids and offer rates for specific amounts.

“In the continuing effort to sustain stability in the foreign exchange market, the CBN shall from time to time intervene in the inter-bank market. This is in addition to (auctions),” the bank said in a circular to Deposit Money Banks. The circular was signed by its Director, Trade and Exchange Department, Mr. Batari Musa.

The regulatory bank provides dollar liquidity to meet high demand and help support the local currency.

Earlier in the month, the naira crashed to an all-time low against the dollar, a development which necessitated an emergency meeting of the CBN Monetary Policy Committee last week.

The local currency had been unstable for a couple of weeks and was trading at N159.30 to the dollar in the inter-bank market on Friday, weaker than N154.60 on Thursday but stronger than the record low of N167.80 which it went for earlier in the month.

Several monetary tightening measures have been adopted by the regulatory bank. One of the notable measures was the recent hike in Monetary Policy Rate by 275 basis points, from 9.25 to 12 per cent.

Meanwhile, the CBN said it would reserve the right to either buy or sell to an authorised dealer, and that it might also participate directly in the inter-bank market by contacting dealers either via the dealing system or by telephone.

“The CBN intends to continue to adopt this approach,” the bank said.

It noted that funds purchased through the interventions could be applied for eligible transactions and could equally be sold (transferable) to other authorised dealers in the inter-bank market, and advised dealers to record the intervention trades as inter-bank transactions.

The bank noted that the intervention trades would be guided by the provisions of the Nigerian Master Agreement for Foreign Exchange Transactions.

Source: Punch/Okechuwku Nnodim