Recent information obtained by Nairametrics reveals that the Central Bank of Nigeria (CBN) has taken significant steps to address the backlog of foreign exchange (forex) demands by banks and airlines.
Sources close to the situation report to our correspondents that financial institutions have acknowledged the clearance of their pending forex requests by the apex bank.
Similarly, airline operators have also observed a substantial resolution of their outstanding forex needs. The exact origins of the funds utilized to eliminate these backlogs remain uncertain at this point.
Nonetheless, it should be noted that the federal government had previously announced an initiative to resolve forex backlogs through the infusion of a substantial $10 billion into the system.
Additionally, insights from a recent Stanbic IBTC report provide further confirmation of the efforts made by the CBN.
According to the report, “The apex bank commenced the process of clearing the backlog of outstanding Retail Secondary Market Intervention Sales (SMIS) obligations just yesterday. The exact volume of forex cleared in this exercise is still being evaluated and is yet to be disclosed.”
A trader who spoke to Nairametrics on the condition of anonymity also revealed CitiBank, Standard Chartered and Stanbic IBTC have confirmed receiving between 70-80% of their backlogs.
Despite the CBN’s external reserves standing at approximately $33.3 billion as of October 31, 2023, it remains speculative to assume that these reserves were the source of the recent forex supply. The situation could be subject to reassessment upon any new updates or revisions to the CBN’s financial records.
Meanwhile, the NAFEX (Nigerian Autonomous Foreign Exchange Rate Fixing) witnessed a depreciation in the official exchange rate, which saw a downturn to N793.28 at the close of the day. This represents a devaluation from the N786.02 rate that was documented in the preceding trading session.
Optics
This progression comes as a notable development, considering the extensive challenges that have plagued the forex market. Banks and airlines, in particular, have been facing severe constraints due to forex scarcity, which has impacted their operations and financial planning adversely.
- The move by the CBN to clear these backlogs is likely to ease significant pressure on the forex market and could potentially lead to a more stabilized exchange rate environment.
- It may also restore a degree of confidence among foreign investors and business operators who rely on the predictability of forex availability.
While the steps taken by the CBN provide immediate relief, it is imperative to closely monitor the long-term sustainability of these measures.
- Analysts and stakeholders are eager to see a detailed disclosure of the strategies employed by the central bank to accomplish this feat, as well as the projected impact on the nation’s foreign reserves and overall economic health.
Market observers and experts await further communication from the CBN regarding the mechanics of this operation.