The Central Bank of Nigeria (CBN) says it has paid an additional $64.44 million to all verified claims by foreign airlines, noting that this is in fulfillment of its pledge to clear the backlog of foreign exchange owed them.
This is even as a dollar exchanges for nearly N1,500 in the parallel market on January 30 2024, increasing pressure on the Nigerian economy and the apex bank.
In a statement sent to Economy Post on January 30, Acting Director of Corporate Communications at the CBN, Ms Hakama Sidi Ali, noted that the latest payment brought the total verified amount paid to that sector to $136.73 million.
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She explained that all the verified airline claims had now been cleared, noting that Governor of CBN, Mr Olayemi Cardoso, and his team were doubly committed and would stop at nothing to ensure that the verified backlog of payments across all other sectors was cleared and confidence was restored in the Nigerian foreign exchange market.
Furthermore, she assured Nigerians that the CBN was working with stakeholders to ensure liquidity improved within the forex market, thereby reducing pressure on the naira.
While expressing optimism that the market would respond positively with the latest injection of over $64 million, she admonished actors in the foreign exchange market to guard against speculation as such actions could hurt the naira.
Sidi Ali urged the public to support the reforms in the foreign exchange market, adding that the CBN would continue to promote orderliness and professional conduct by all participants in the forex market to ensure market forces determine exchange rates.
$500m released to all sectors
On January 29, the apex bank announced that it had released $500 million to various sectors to further cut the backlog of verified foreign exchange transactions.
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Ms Sidi Ali said the CBN had begun to execute a comprehensive strategy to improve liquidity in the Nigerian foreign exchange markets in the short, medium, and long term.
“As the Governor said, the CBN’s focus is on addressing fundamental issues that have hindered the effective operation of the Nigerian FX markets over the years,” she noted.
She stressed that the forex market reforms were designed to unify multiple exchange rates and reduce arbitrage opportunities, explaining that the ongoing efforts of the apex bank would boost investor confidence and attract foreign investment.
She urged all participants in the market to play by the rules, as doing that would enable the fair determination of exchange rates and guarantee stability for businesses and individuals alike.
Naira weakens further
Meanwhile, the naira is getting weaker in both official and parallel markets in Africa’s biggest oil producing nation. Naira fell to N1,420/$ at the official market on January 29, indicating an 18 percent decline from N1,200 reported in early January 2024.
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At the parallel market where most transactions take place, naira went between N1,460 and N1,470 between 2.00pm and 2.50pm on January 30.
Some Bureau de Change (BDC) operators at Zone 4 in Abuja and Airport Road in Lagos expect that the local currency will hit N2,000 by the middle of the year “except a miracle happens.”
“I think it will reach N2,000 by June, 2024,” said a BDC operator at Zone 4, Abuja, Mr Aminu Magaji. “More people are demanding dollars for travels and international transactions now,” he added.
A BDC operator at Lagos Airport, Mr Abubakar Dogoyaro, said there was so much speculation with the naira, stating that this was not good for the country.
The real issues
Economists and manufacturers say that the major problem is that Nigeria is paying less attention to the supply side of the forex market while dedicating an unusual time to the demand side.
According to the Manufacturers Association of Nigeria (MAN), the Nigerian government must overhaul the power sector and incentivise investment in renewables to boost electricity generation and promote energy-cost efficiency.
In a statement signed by Director-General of MAN, Mr Segun Ajayi-Kadir, the body said the government should “encourage local sourcing of raw materials through comprehensive and integrated incentives to address the challenges of low productivity and imported inflation.”
“There is a need to prioritize forex and credit allocation to the manufacturers and reduce the number of BDCs to curb their excesses and untoward operations through effective management and supervision.”
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A lecturer of Economics, Prof Uche Nwogwugwu, urged the Nigerian government to incentivise manufacturers to produce goods that will satisfy the local market and boost exports.
“This seems to be the only way out of this forex problem. When manufacturers produce and export, they bring in forex. Even when they don’t export, their products in the local markets will reduce importation and boost the naira,” he explained.
