CBN pumps $81m into BDCs as FX demand heightens

By Chinwendu Obienyi

The Central Bank of Nigeria (CBN) intervened in the foreign exchange (FX) market last week, selling approximately $81 million to authorised dealers as rising demand pressures continued to weigh on the naira.

The domestic currency depreciated by 0.4 per cent week-on-week (w/w) to N1,538.00/$1, as demand outpaced available supply despite the apex bank’s support.

The intervention underscores the CBN’s commitment to stabilizing the FX market, even as external reserves recorded a third consecutive weekly increase, signaling improved external inflows and market confidence.

Data from the CBN showed that gross FX reserves rose by $778.34 million to $38.63 billion as of July 24, 2025, the highest level in recent months.

While spot market pressures persisted, the forward market painted a more optimistic picture. Across all contract tenors, the naira appreciated modestly, reflecting investor confidence and expectations of continued FX inflows.

Specifically, the 1-month forward gained 0.2 per cent to N1,576.21/$1; the 3-month rose 0.4 per cent to N1,647.65/$1; the 6-month contract strengthened by 0.3 per cent to N1,757.35/$1; and the 1-year forward rate appreciated by 0.3 per cent to N1,966.40/$1.

Market analysts attributed the positive forward rates to a combination of improving FX liquidity, robust capital inflows from foreign portfolio investors (FPIs), and sustained efforts by the CBN to restore order in the market through periodic interventions and improved transparency.

“The CBN’s FX interventions have supported some level of confidence in the market,” said a Lagos-based fixed income analyst. “With reserves trending upward and naira yields remaining attractive, we expect relative stability in the near term.”

Cordros Research in its weekly assessment of the market said, “We expect the naira to remain relatively stable, supported by robust FX liquidity and sustained inflows from both domestic and foreign sources.

This positive outlook is anchored on continued market confidence and attractive naira yields”.

Overall, while short-term FX volatility remains a concern, the broader outlook for the naira remains cautiously optimistic, buoyed by improving reserve levels, steady foreign inflows, and market reforms aimed at fostering transparency and stability in Nigeria’s currency and fixed-income markets.

Meanwhile, in the domestic debt market, the Debt Management Office (DMO) is expected to raise N100 billion through the re-openings of the APR-2029 and JUN-2032 Federal Government bonds at a scheduled auction today.

The offer comes as investors closely watch for cues that could influence secondary market yields in the coming week.

“The DMO’s auction today will be closely watched, particularly as market players expect softer yields driven by robust demand and a potential shift in the monetary policy outlook,” one dealer said.

He added that demand-supply dynamics, particularly strong domestic participation and moderate issuance could support a downward trend in bond yields over the medium term.

The FGN bond secondary market was bullish as institutional investors sought to invest their coupons. Accordingly, the average yield for bonds declined by 29 basis points (bps) to 16.3 per cent.

Across the benchmark curve, the average yield decreased at the short (-35bps), mid (-43bps), and long (-17bps) segments, driven by heightened demand for the APR-2029 (-48bps), APR-2032 (-69bps), and MAR-2036 (-40bps) bonds, respectively.