The Central Bank of Nigeria (CBN) recently said all valid foreign exchange backlogs of around $7 billion have now been settled, a move that saw the value of the naira which had hovered around N1,650 to the dollar gain significantly.
In a statement , the apex bank’s acting director, Corporate Communications, Mrs Hakama Sidi Ali, confirmed that independent auditors from Deloitte Consulting meticulously assessed these transactions, ensuring that only legitimate claims were honoured.
She said that the CBN recently concluded the payment of $1.5 billion to settle obligations to bank customers, effectively settling the residual balance of the forex backlog. This alongside a supply of foreign exchange at the Nigeria Autonomous Foreign Exchange Market (NAFEM) had boosted liquidity.
The apex bank also intervened in the market thrice within the week with total sales of $195 million. These had seen the value of the naira appreciate by 12 per cent by the end of last week’s trading activities.
The value of the naira which had closed the previous week at N1,502 to the dollar saw a spike in value to close last week Friday at N1,431.49 to the dollar. the gains by the local currency has continued this week with the naira selling at N1,382.95 to the dollar on Tuesday.
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Analysts note that the CBN’s increased intervention in the foreign exchange market which includes thepayment of the last portion of the forex backlogs and the commencement of retail sales of dollars to banks within the range of N1,300 – N1,400 to the dollar will boost confidence in the FX market and stabilise the naira.
While the CBN is expected to continue its forex intervention in the near term, analysts at Cordros Research say they “do not expect a substantial increase in forex liquidity due to the relatively weak forex reserves. However, barring any notable shocks, the reduced currency speculation and improved FPI inflows due to high naira yields may continue to strengthen the local currency in the near term.”
On his part, special adviser to the Senate Committee on Banking, Insurance and Other Financial Institutions, Uche Uwaleke, noted the Naira’s gains are as a result of CBN’s actions, including the clearance of forex backlogs and the resumption of forex sales to qualified BDCs.
“The ability of the Central Bank to clear of valid forex backlog has helped to bring down speculation and improve confidence.”
The resumption of forex sales to qualified BDCs has gone a long way in improving liquidity in the retail segment of the forex market.
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