The naira fell to an all-time low of N1,667.42 per dollar in the official market on Wednesday, a day after the Central Bank of Nigeria (CBN) raised its benchmark interest rate to 27.25 percent to rein in core inflation and stabilise the exchange rate market.

After Wednesday trading, the naira fell by 0.54 percent, keeping the exchange rate at N1,667.42/$ compared to N1,658.48/$ seen on Tuesday at the Nigerian Autonomous Foreign Exchange Market (NAFEM).

The local currency fell to a seven-month low of over N1, 700 per dollar in the black market, the lowest fall since February 22, 2024, when the dollar was quoted at the rate of N1,850/$ in the black market, also known as the parallel market.

?Dollar is very, very scarce in the market,? one black market operator in Lagos told BusinessDay on Wednesday.

Shortly after the CBN announced the Monetary Policy Committee?s (MPC) interest rates hike for the fifth consecutive time this year, the naira depreciated by N95.83 in the official foreign exchange (FX) market on Tuesday, September 23, 2024.

By the close of trading on Tuesday, the naira fell by 5.8 percent, with the dollar quoted at N1,658.48/$, compared to N1,562.66/$ traded on Monday at the NAFEM.

Olayemi Cardoso, governor of the CBN, said on Tuesday that the MPC noted the continued growth in money supply, recognising the need to curtail excess liquidity in the system as well as address foreign exchange demand pressures.

?Members were also concerned about the growing level of fiscal deficit but acknowledged the commitment of the fiscal authority not to resort to monetary financing through Ways & Means. Furthermore, members observed a strong correlation between Federal Account Allocation Committee (FAAC) releases and liquidity levels in the banking system as well as its impact on the exchange rate. The Committee, therefore, agreed to increase monitoring of future releases with a view to addressing its effects on price developments,?? he said.

Muda Yusuf, director/CEO, Centre for the Promotion of Private Enterprise (CPPE), said, ?The rate hike cannot address these issues. The issues are much deeper. The rate hike is putting unnecessary pressure on those who are borrowing money.?

Money supply (M3), which is a broad measure of the total amount of money in an economy, reached an all-time high of N107.18 trillion in August 2024, despite the tightening measures of the apex bank.

Data from the CBN showed that M3 rose to a record high of N107.18 trillion in August 2024. This represents a 61.93 percent increase from N66.19 trillion recorded in the corresponding period of August 2023.

Cardoso said money supply was about N19 trillion in 2025 but grew to N54 trillion by 2023, basically driven by ways and means.

?That is a huge increase, and a substantial amount of that was through Ways and Means. So essentially, printing of money resulted in a huge amount of money chasing a relatively small amount.

?And to put it in another way, while the economy, on average, was growing at 1.2 percent during that time, money supply was growing at 12.6 percent, so you can see the inherent distortion there.?

CBN sells dollars to BDCs at N1,590

Meanwhile, CBN, on Wednesday, announced that it will sell dollars to Bureau De Change (BDC) operators at a rate of N1,590 per dollar in a move aimed at boosting liquidity in the foreign exchange market. The CBN made this known through a directive issued to BDC operators and the general public.

In the statement, the CBN revealed that each eligible BDC would be able to purchase up to $20,000 to cater to retail market demand for invisible transactions. ?This move is to ensure adequate liquidity and meet the growing demand for invisible transactions in the market,? the CBN explained.

The directive, signed by W . J. Kanya, acting director of the trade and exchange department, further outlined that BDCs are allowed to sell the dollars to end-users at a margin of not more than one percent above the CBN?s purchase rate.

BDC operators interested in participating in this transaction must make the required naira payment to the CBN?s deposit accounts and submit all necessary documentation at the designated CBN branches in Abuja, Awka, Kano, and Lagos.

BDCs have lauded the move, saying it will provide much-needed relief to the forex market. One operator noted, ?This will help stabilise the market and give us the ability to meet customer demands more efficiently.? (BusinessDay)

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