N700/$: Hope Rises for Naira To Bounce Back Against Dollar As CBN Intensifies Solution, Gets Support

N700/$: Hope Rises for Naira To Bounce Back Against Dollar As CBN Intensifies Solution, Gets Support

  • 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.

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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.

CBN naira to dollar exchange rate
CBN governor Cardoso set to get much needed support from Saudi Arabia Photo credit: CBN
Source: Twitter

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.

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"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/$1 in the official market after falling to a record low of N996/$.

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New report, expert predict naira will continue to fall in official market until 2025

Nigeria Customs sets new exchange rate to clear imported goods

Earlier, Legit.ng reported that Nigeria customs have adjusted the foreign exchange rate for clearing imported goods at Nigerian ports

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.

Source: Legit.ng

Dave Ibemere avatar

Dave Ibemere (Senior Business Editor) Dave Ibemere is a senior business editor at Legit.ng. He is a financial journalist with over a decade of experience in print and online media. He also holds a Master's degree from the University of Lagos. He is a member of the African Academy for Open-Source Investigation (AAOSI), the Nigerian Institute of Public Relations and other media think tank groups. He previously worked with The Guardian, BusinessDay, and headed the business desk at Ripples Nigeria. Email: dave.ibemere@corp.legit.ng.

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