- The CBN continues to find solutions to naira depreciation across the foreign exchange market.
- Reports show that the CBN has intensified its effort to repay the forex backlogs owed to international companies and banks
- The CBN hopes the move will provide the forex liquidity the market needs to ease pressure on the Naira
Dave Ibemere has over a decade of experience covering Business and the Economy
Naira is set to rebound in the coming days as the Central Bank of Nigeria (CBN) moves to clear the FX forward contract.
An FX forward contract is a bilateral agreement where one party (the seller) agrees to sell FX to another party (the buyer) at a predetermined settlement date in the future and at a strike price, which is fixed at the time of entering into the contract.
CBN source claims naira crash caused by powerful Nigerians, says speculators sabotaging FG's efforts
It is also a binding contract in the FX market that locks in the exchange rate for the purchase or sale of a currency on a future date.
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Naira set to bounce back
ThisDay reports that apex bank has promised to clear a substantial amount of the outstanding FX forward obligations before the end of November 2023.
The move, it is believed, will usher in improved FX liquidity in the market and help ease the pressure on Naira.
A top bank official quoted in another report expressed optimism that the naira exchange rate would improve in the coming days.
The official said:
“For smaller Nigerian banks and foreign banks, the Central Bank of Nigeria (CBN) has approved clearance for at least 80% of their FX forwards.
"However, larger Nigerian banks have only recently begun the clearance process, with the central bank having cleared approximately five to 10% of their FX forwards.
"The current plan is to clear 30% for these big banks in the next two weeks, injecting liquidity into the system.
"There is also a scheme of arrangement in place to address the remaining balance. Realistically, the naira's trading range should be between N700 and N800/$ if not for the speculative activities affecting the currency."
Legit.ng also reported that Saudi Arabia's Crown Prince, Mohammed Bin Salman, promised to help make available enough dollars in exchange to fix Nigeria's forex scarcity.
These two events are expected to help Naira improve in the coming days.
CBN's forex decision impact
The CBN's decision on forex backlog helped the Naira recover some of its lost value against the dollar before the momentum waned.
However, there was improvement at the end of trading on Friday, November 10, 2023, as the Naira closed at N780.14/$1 in the official market after falling to a record low of N996/$.
Nigeria Customs sets new exchange rate to clear imported goods
The new rates are intended to reflect the depreciation of the Naira against the dollar across the foreign exchange markets.
With the new rate, the cost of imported goods will increase nationwide.