The Central Bank of Nigeria (CBN) has said that it has released 500 million dollars to various sectors in its determination to address the backlog of verified foreign exchange transactions.
Mrs. Hakama Sidi-Ali, CBN’s Acting Director of the Corporate Communications Department, said this in a statement on Monday in Abuja.
According to the News Agency of Nigeria (NAN), Sidi-Ali said this comes barely a week after the apex bank paid approximately 2.0 billion dollars to settle outstanding commitments across manufacturing, aviation, and petroleum sectors.
She said that the management of the CBN was committed to settling all legitimate foreign exchange backlogs within a short time frame.
A comprehensive strategy to improve liquidity
She said the CBN had begun implementing a comprehensive strategy to improve liquidity in the Nigerian foreign exchange markets in the short, medium, and long terms.
- “As the Governor said, the CBN’s focus is on addressing fundamental issues that have hindered the effective operation of the Nigerian FX markets over the years,” she said.
Sidi-Ali said that the forex market reforms were designed to streamline and unify multiple exchange rates, foster transparency, and reduce arbitrage opportunities.
She expressed confidence that a stable exchange rate would boost investor confidence and attract foreign investment.
She urged all participants in the market to play by the rules, adding that transparency in the market would enable the fair determination of exchange rates.
What you should know
In the last three months, the Central Bank of Nigeria (CBN) has successfully cleared almost $2 billion in overdue foreign exchange forwards, aiming to resolve the backlog of dollars in Africa’s largest economy.
Hakama Sidi Ali, the acting director of corporate communications at the apex bank, disclosed this information in a statement.
Despite these efforts, forex shortages persist, impacting the value of Nigeria’s naira currency. With about $7 billion in matured forex forwards, a source of concern for investors, the CBN has committed to making payments to instill confidence in the foreign exchange market.
What the CBN spokesperson said:
- “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.”
Ali mentioned that the CBN has disbursed $61.64 million to foreign airlines, which were owed money for tickets sold in the local currency but faced challenges repatriating their funds from Nigeria.
As of November, the outstanding debt to foreign airlines exceeded $700 million.
- “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,” Ali said.
Over the years, the Nigerian FX market has experienced a consistent decline. This decline exacerbated and resulted in over 50% naira depreciation after the Central Bank of Nigeria (CBN) disclosed its decision in June to consolidate all forex exchange windows into the Investors and Exporters (I&E) window.
To stabilise the country’s volatile foreign exchange market, and relieve Nigeria of its outstanding forex liabilities, the NNPCL is in the process of securing a $3 billion emergency loan from the Afrexim Bank.
President Bola Tinubu has pledged to enhance foreign currency inflows into Nigeria by attracting new investments, increasing oil production, and implementing reforms in the foreign exchange market.
