Nigeria CBN sells $250m FX to banks as naira firms and IMF urges faster subsidy reforms

The Central Bank of Nigeria sold $250 million in foreign exchange to authorized dealers and local banks on Wednesday to support the naira. Officials said the intervention, part of a broader liquidity-boosting strategy, aimed to meet international payment obligations and reduce backlogs of unmet FX requests, helping the naira appreciate at the official exchange rate.

The $250 million foreign exchange injection was executed through multiple transactions, including seven- to 30-day FX forward contracts allocated to key sectors such as agriculture, airlines, petroleum products, and raw materials, officials said. The Central Bank of Nigeria (CBN) directed the funds to authorized dealers and deposit money banks, which were tasked with passing on the foreign currency to end-users within specified time frames and at regulated margins, sources confirmed. The intervention aimed to meet international payment obligations by providing liquidity to banks handling foreign payment requests from corporate clients engaged in external trade, according to CBN officials.

Following the intervention, records show the naira appreciated by approximately 0.20% at the official exchange window, strengthening to ₦1,453.84 per US dollar in one reported instance.

At the Nigerian Autonomous Foreign Exchange Market (NAFEM), the spot rate reached an intraday high of about ₦1,462.50 per dollar, indicating moderated pressure but sustained demand, according to market data. In the parallel or street market, the naira also firmed, advancing from roughly ₦1,460 to ₦1,455 per dollar, supported by the CBN’s FX sales and seasonal inflows, sources confirmed.

The CBN described the $250 million intervention as part of a broader liquidity-boosting strategy rather than a one-off event, with plans to conduct repeated sales or injections of similar size over coming days or weeks. Officials framed these actions as efforts to reduce backlogs of unmet foreign exchange requests and to support exchange-rate stability amid strong corporate and consumer demand for dollars. The bank’s medium-term policy thrust includes preserving price, monetary, and exchange-rate stability while growing external reserves and supporting economic growth, according to official statements.

Sectoral allocation of the FX funds prioritized industries seen as vital to economic diversification and stability. Airlines received foreign currency to address trapped ticket sales and outstanding FX obligations, a persistent challenge in Nigeria’s aviation sector, sources said. Petroleum product importers were allocated FX to meet refined fuel import needs, aiming to ease pressure on the domestic energy and logistics chain. Agricultural and raw-material importers also benefited, consistent with the CBN’s development finance agenda targeting production and industrial inputs.

The International Monetary Fund (IMF) has urged Nigeria to accelerate structural reforms, particularly the phasing out of fuel and electricity subsidies, to safeguard macroeconomic stability. IMF staff reports and Article IV consultations have highlighted that subsidies are costly and regressive, crowding out priority spending on health, education, and infrastructure. The Fund recommends replacing broad subsidies with targeted social safety nets and advocates for greater foreign exchange market unification and transparency to attract investment and reduce distortions, according to IMF communications.

IMF officials have cautioned that large-scale FX interventions, such as the recent $250 million tranches, should be complemented by fiscal consolidation and subsidy reforms to prevent continued pressure on reserves and the naira. The Fund links naira stability to broader reforms, including raising non-oil revenues, strengthening monetary policy transmission, and improving governance in the oil and FX sectors. Analysts note that while the CBN’s intervention helped the naira firm in the short term, underlying foreign exchange demand remains elevated due in part to fuel subsidies and price controls that distort import patterns and dollar demand.

The persistence of petroleum product imports financed by foreign currency is partly attributed to regulated prices and subsidy mechanisms that reduce incentives for domestic refining and efficient energy use, IMF analysis shows. The FX injections are viewed as bridge measures providing temporary relief while the medium-term success of the naira depends on faster subsidy reform and diversification of export earnings. Policy discussions in Nigeria increasingly focus on balancing the immediate social and political costs of subsidy removal against the macroeconomic benefits of reduced FX pressure and fiscal deficits.

Following the $250 million injection, the naira traded around ₦1,453.84 per dollar at the official window and ₦1,455 in the parallel market, reflecting modest improvements from previous levels, according to market reports. The CBN characterizes such interventions as necessary to boost liquidity, support stability, and meet legitimate foreign exchange demand in line with its statutory mandate for price and financial stability. While the $250 million magnitude is significant relative to daily turnover in the official FX market, it remains modest compared with Nigeria’s total external reserves, which the CBN aims to grow and preserve under its medium-term strategy.

Analysts and multilateral institutions warn that repeated ad hoc FX sales without faster subsidy and fiscal reforms risk depleting reserves and delaying adjustment of the naira to sustainable levels. Persistent risks include renewed naira depreciation, widening of the official-parallel rate gap, and continued FX backlogs if structural issues—such as subsidies, weak non-oil revenues, and governance constraints—are not decisively addressed.