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CBN Resolves $500 Million FX Backlog to Tackle Naira’s Decline

Yesterday, the Central Bank of Nigeria (CBN) announced the release of an additional $500 million to address verified outstanding foreign exchange (FX) liabilities in various sectors of the economy. This move aimed to counter the persistent decline of the Naira in both official and parallel markets.

However, the injection did not alleviate the Naira’s struggles, as it continued to depreciate against the US dollar on the parallel market, reaching N1,460/$1, moving towards N1,500. Simultaneously, President Bola Tinubu approved the immediate transfer of crude oil receipts from the Nigerian National Petroleum Company (NNPC) Limited to the CBN.

The Naira’s decline on the parallel market resulted in a N40 loss in a single day, dropping from N1,420/$1 over the weekend to N1,460/$1 yesterday. Contrastingly, on the official Investors and Exporters’ (I&E) window, the Naira closed at N1,348.62/$1, the same as Friday’s closing figure.

Data from the FMDQ website indicated a 36.38% decline in daily turnover, decreasing from $100.97 million on Friday to $64.29 million yesterday. The CBN’s intervention followed a recent payment of approximately $2 billion to settle outstanding commitments in manufacturing, aviation, and petroleum sectors.

Mrs. Hakama Sidi Ali, CBN’s acting Director, Corporate Communications Department, reiterated the bank’s commitment to addressing legitimate foreign exchange backlogs promptly. The ongoing market reforms aim to streamline exchange rates, enhance transparency, and reduce arbitrage opportunities.

Ali emphasized the importance of market participants adhering to rules, highlighting that transparency would facilitate fair exchange rate determination, ensuring stability for businesses and individuals.

The recent CBN intervention, part of a comprehensive strategy to enhance liquidity in the Nigerian foreign exchange markets, is expected to bolster the Naira against major world currencies and instill confidence among investors.

This move aligns with the government’s broader efforts to resolve FX backlogs and attract foreign investment, complemented by the recent receipt of a $2.25 billion facility from Afreximbank to address the acute FX shortage. Tinubu’s commitment to strategic reforms and centralizing control over crude oil revenue in the CBN is viewed as a decisive step towards transparency in economic dealings.

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