CBN Governor Denies Spending Forex Reserves on Naira Support

The Governor of the Central Bank of Nigeria (CBN), Yemi Cardoso, has dismissed claims that the bank is using Nigeria’s foreign exchange reserves to stabilise the naira. According to Cardoso, the recent decline in the reserves is primarily due to debt repayments and other obligatory payments, which are crucial for maintaining the country’s credibility in international markets.

Forex Reserves and Naira Stability

Rumours of the CBN’s intervention to support the naira gained traction following a notable reduction in Nigeria’s forex reserves, which fell from $34.45 billion on March 18 to $32.29 billion on April 15. This more than $2 billion drop over 29 days coincided with an impressive recovery of the naira against the U.S. dollar. The Nigerian currency, strengthening since March, was recently named the best-performing currency in April, sparking speculation about the central bank’s role in this turnaround.

Some observers credit the naira’s resurgence to policy adjustments by the CBN and crackdowns on suspected currency speculators. However, others argue that the naira’s rise from 1,800 NGN to 1 USD in early March to around 1,000 NGN to 1 USD by mid-April indicates a deliberate intervention by the CBN to support the currency.

Clarifying CBN’s Forex Strategy

In response to these claims, Cardoso emphasised that the CBN’s approach to exchange rate management does not include actively defending the naira. He reiterated the bank’s commitment to a “willing-buyer, willing-seller” approach to price discovery, with minimal central bank interference. “Ultimately, I perceive a future where the central bank will really not need to intervene except in very unusual circumstances,” said Cardoso.

Although the CBN did intervene by selling foreign exchange to currency exchange offices at a rate below the prevailing market rate, Cardoso clarified that the amount of U.S. dollars involved was “small.” This strategy is not aimed at manipulating the naira’s value but rather at ensuring market stability.

The CBN Governor’s remarks underscore the central bank’s intent to manage Nigeria’s exchange rate with a light touch, relying on market forces to determine the naira’s value while maintaining the country’s economic credibility through responsible debt management.