CBN injects $280mn into forex market

The Central Bank of Nigeria has once again stepped in to inject $280 million into the forex market to meet the demand for dollars. This move comes as the stock market in Nigeria finished sharply lower, prompting concerns about the overall economic stability. Lekan Olabisi, a Fixed Income Analyst at GT Bank, sat down with CNBC Africa to discuss the recent developments in the forex and fixed income markets. Olabisi highlighted the ongoing interventions by the CBN and raised questions about the potential risks associated with overregulation in the forex market. He pointed out that while the CBN has been the main supplier of FX, there is a need to consider pricing dynamics to prevent any distortions in the market. The focus on different sectors, such as retail players, BDCs, PTAs, and SMEs, indicates a targeted approach by the CBN to address specific needs and enhance liquidity in the market. However, the delicate balance between supply and pricing remains a key challenge that policymakers will need to navigate carefully. Moving on to the fixed income market, Olabisi expressed concerns about the bearish trend and increased volatility in the sector. With liquidity constraints and high yields in the treasury bill space, investors are facing challenges in managing their portfolios effectively. The tightening liquidity conditions, exacerbated by FX pressures, are likely to continue shaping the fixed income landscape in the near term. Looking ahead, the key question revolves around the central bank's strategy for the forex market and its focus on supporting various sectors, including manufacturing companies and SMEs. While temporary measures have been implemented to address immediate needs, the long-term sustainability of these interventions remains uncertain. Olabisi emphasized the importance of bringing all stakeholders together to ensure a more holistic and effective approach to stabilizing the forex market and promoting economic growth. Overall, the latest injection of $280 million by the CBN underscores the continuing efforts to shore up the forex market and address currency demand. As market dynamics evolve and external pressures persist, policymakers will need to remain vigilant and adaptive to navigate the challenges ahead.