CBN injects $500m to clear FX backlog as Naira sinks to N1455/$
…FG urged to sell moribund assets to raise needed FX
By Temitope Adebayo
The Central Bank of Nigeria (CBN) on Monday injected an additional $500 million into the foreign exchange market to clear the FX backlog.
The Naira at the unofficial foreign exchange market yesterday stood at a buying rate of N1,445 and sold at N1,455 to the dollar, while the local currency was quoted against the Pound sterling at N1830 and sold at N1850.
Similarly, the Naira buying rate to the Euro yesterday was N1540 and sold at N1560. The Naira was N1,120/$ on December 31, 2023. It went down to N1,400 on Friday, January 26, 2024, at the black market, recording a drop of N200 or 16,6 percent. It was N898 to a dollar at the official market on December 31, 2023, to N910 on Friday.
Last week, the Nigerian foreign exchange market saw a historic decline in the value of the naira, which reached an unrivalled intraday high of N1,399 per dollar at the official market on Thursday, January 25, 2024.
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Data from FMDQ showed a significant 6.15 percent drop compared to the N1,313 rate observed during the intraday trading a day earlier.
The naira declined sharply in the official market. Also, the intraday low saw a significant 11.28 percent drop as the dollar was quoted at N789 on Thursday, January 25, 2024, in contrast to N700 on Wednesday, January 24, 2024.
At the end of trading, the Naira fell by 2.08 percent to close at N900.96 per dollar from the N882.24 recorded on Wednesday, January 24, 2024, at NAFEM.
The naira also fell to its lowest in the parallel market at N1,416 per dollar.
This comes barely a week after the CBN announced that it had so far disbursed approximately $2 billion across pivotal sectors like manufacturing, aviation, and petroleum.
A statement signed by the Acting Director of the Corporate Communications Department at the CBN, Hakama Ali, said the management of the apex bank is committed to settling all legitimate foreign exchange backlogs within a short time frame.
According to her, the CBN had begun implementing a comprehensive strategy to improve liquidity in the Nigerian foreign exchange markets in the short, medium, and long term.
“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.
In addressing the recent forex market reforms, Mrs Ali reiterated the bank’s goal of streamlining exchange rates, fostering transparency, and minimising arbitrage opportunities.
She expressed confidence that a stable exchange rate would instil investor trust and attract foreign investment.
Mrs Ali urged market participants to adhere to regulations, emphasising that transparency in the market would ensure fair exchange rate determination and overall stability for businesses and individuals.
Reacting to the continual depreciation of the Naira to the dollar, financial experts projected that the Naira may hit N2000 to a dollar exchange mark in a matter of months considering the currency’s decline at both the official and parallel markets despite efforts being made by the apex bank.
Analysts are of the opinion that the CBN is already overwhelmed as the capacity to intervene in the foreign exchange market is limited due to the depletion of the nation’s foreign reserves.
An economist, Cyril Ampka, observed that the rate at which the Naira has been falling is alarming.
“My worry is that it seems the Naira is condemned to its worst devaluation in history. This is not encouraging businesses as some of them need forex to keep their company as a going concern.
“I will suggest that Nigeria should, as a matter of urgency, consider selling some moribund assets to raise the needed foreign exchange to stabilise the market”.
Also, a financial expert, Simon Akilo, said the CBN seems to have reached a point where it can no longer face the demand of stabilising the foreign exchange market alone.
“Looking at the development, the Federal Government must be ready to support the CBN more significantly than it is currently doing. The NNPCL initiative with the Afreximbank is good but not enough”, he said.
