The Central Bank of Nigeria (CBN) has reportedly failed to fulfill its promise of clearing over $10 billion in foreign exchange debts owed to Deposit Money Banks (DMBs). This delay has led to the naira being sold between 990/$ and 995/$ by Bureau De Change operators in Lagos, Abuja, and Kano.
Despite the naira’s depreciation, it appreciated to 747.76/$ on the Investor & Exporter forex window on Friday, up from 772.98/$ on Thursday.
The former acting CBN Governor, Folashodun Shonubi, had announced on September 6, 2023, that the CBN had concluded negotiations on dollar debts with commercial banks and that all forex exchange backlogs would be cleared within one to two weeks. However, according to multiple top bank executives, almost three weeks after the promise, the CBN has yet to fulfill its commitment, resulting in tight FX liquidity for banks.
This delay has also exacerbated dollar liquidity issues at the parallel market, with bank customers turning to the black market to meet their forex needs.
Manufacturers are concerned that the worsening naira value will lead to higher production costs and potential factory shutdowns, which would further affect the prices of goods and services.
Operators in the economy are calling for urgent intervention to prevent additional hardships for Nigerians, as the floating of the naira has fueled currency speculation and increased the activities of speculators.
The new CBN Governor, Dr. Olayemi Cardoso, faces significant challenges in managing the country’s forex market and economic reforms to stabilize the situation.
CBN has not commented on the issue as of yet.
The naira has faced significant pressure at the black market, with Bureau De Change operators in Lagos, Abuja, and Kano reporting dollar scarcity. This has led to higher exchange rates, with some operators selling the naira for as much as 1,000/$.
This scarcity has impacted various sectors of the economy, including manufacturing, and raised concerns about the cost of goods and services for Nigerians.
Inflation and Confidence
The depreciation of the naira is expected to result in higher prices for products, as the cost of raw materials continues to rise. Manufacturers are worried that imported products may become cheaper than domestically produced goods.
Additionally, the foreign exchange crisis has led to a confidence crisis in the forex market, causing uncertainty and speculation.
The new CBN Governor faces the challenge of managing these economic issues and restoring confidence in the market. Urgent intervention is needed to address the backlog of forex obligations and stabilize the forex market.
The CBN’s efforts to control the exchange rate and reduce volatility will be crucial in managing the economic challenges Nigeria is currently facing.