In a fresh move to address the persistent challenges in Nigeria’s foreign exchange (FX) market, the Central Bank of Nigeria (CBN) has recently released $500 million, targeting the backlog of verified foreign exchange transactions spanning various sectors.
Mrs. Hakama Sidi-Ali, the Acting Director of the CBN’s Corporate Communications Department, made the announcement, signaling the apex bank’s commitment to resolving longstanding issues within the FX market.
This latest action comes on the heels of the CBN’s payment of approximately $2.0 billion to settle outstanding commitments in crucial sectors such as manufacturing, aviation, and petroleum.
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Mrs. Sidi-Ali noted the apex bank’s dedication to promptly settling all legitimate foreign exchange backlogs, reflecting a proactive approach to addressing the challenges facing the Nigerian economy.
“In the past three months, the CBN has also redeemed outstanding forward liabilities amounting to almost USD 2 billion,” Ali said.
“This underscores the Bank’s commitment to the resolution of pending obligations and a functional foreign exchange market.”
The CBN’s strategy to enhance liquidity in the foreign exchange markets encompasses short-, medium-, and long-term measures. Reforms have been implemented to streamline and unify multiple exchange rates, foster transparency, and reduce arbitrage opportunities.
Mrs. Sidi-Ali reiterated the CBN’s commitment to addressing fundamental issues that have historically impeded the effective operation of Nigeria’s FX markets.
“In the past three months, the CBN has successfully cleared almost $2 billion in overdue foreign exchange forwards.
She further shed light on the ongoing commitment of the CBN to resolving pending obligations and maintaining a functional foreign exchange market. According to her, Specific disbursements include $61.64 million to foreign airlines facing challenges repatriating funds from Nigeria.
“These payments signify the CBN’s ongoing efforts to settle all remaining valid forward transactions, with the aim of alleviating the current pressure on the country’s exchange rate,” she said.
Despite these efforts, persistent forex shortages continue to impact the value of Nigeria’s naira currency, posing challenges to economic stability. Nigeria has about $7 billion in outstanding matured forex forwards, a situation the Minister of Finance Wale Edun has fingered as a major contributor to the FX crisis.
The impact of the FX crisis has had a weighty bearing on airline operations in Nigeria, forcing Emirate Airlines to suspend its operations in Nigeria. The outstanding debt to foreign airlines exceeded $700 million as of November.
The Nigerian FX market has experienced a continuous downturn, further intensified by the CBN decision in June to merge all forex exchange windows into the Investors and Exporters (I&E) window, now called NAFEM. The intention behind this move was to bring stability to the volatile foreign exchange market.
In a move to help, the Nigerian National Petroleum Corporation Limited (NNPCL) secured a $3 billion emergency loan from the African Export-Import Bank (Afrexim Bank). Though the first tranche of the loan has been disbursed, the Nigerian government is understood to be waiting for the final tranche to reduce the FX backlog.
President Bola Tinubu has pledged comprehensive efforts to enhance foreign currency inflows into Nigeria. His approach involves attracting new investments, increasing oil production, and implementing reforms in the foreign exchange market. The president’s commitment aligns with the broader goal of fostering a resilient and dynamic economy.
While the recent actions by the CBN indicate a commitment to addressing the ongoing FX crisis, the naira has continued with its poor performance, dwindling further in the FX markets. As of Monday, the naira exchanges at N1,451.395 per dollar in the parallel market and N891.90 per dollar in the official market.