Listen to this articleThe domestic currency appreciated following the CBN’s clearance of the backlog of foreign exchange forward contracts.
On Friday, November 17, 2023, manufacturers, importers heaved a sigh of relief as the Nigerian naira appreciated massively against the United States dollar, closing at ₦791.75/$1 at the official market.
The naira’s gain was, however, expected due to the recent move of the Central Bank of Nigeria’s (CBN) to clear some of its FX backlog to boost confidence in the currency.
Data from the Nigerian Autonomous Foreign Exchange Fixing (NAFEX), the country’s official exchange rate window, showed that the naira appreciated 6.24% to close at ₦791.75 to a dollar at the close of business on Friday,
The appreciation represents ₦49.39 gain or a 5.24% increase in the local currency compared to the ₦841.14 it closed on Thursday.
The intraday high recorded was ₦1120/$1, while the intraday low was ₦701/$1, representing a wide spread of ₦419/$1.
According to data obtained from the official NAFEX window, forex turnover at the close of the trading was $157.78 million, representing a 23.60% decline compared to the previous day.
Meanwhile, the CBN last week said it has begun clearance of the backlog of foreign exchange forward contracts.
The move, experts says is expected to bring relief to the naira, the business community, and the economy at large.
The country has faced chronic dollar shortages since foreign investors exited local assets during a period of low oil prices. Since then, investors are yet to return and the central bank has struggled to meet the demand for dollars from foreign investors seeking to repatriate funds or airlines seeking to send money from ticket sales abroad.
The central bank’s payments follow the October 23 announcement by the finance minister, Wale Edun, that Nigeria was expecting $10 billion of inflows to improve FX market liquidity.
It will come as a relief to local lenders, who have been struggling to meet demands from customers due to chronic dollar shortages in Africa’s largest economy.
Speaking on CBN’s clearance of forex backlog, deputy president of Lagos Chamber of Commerce and Industry (LCCI), Gabriel Idahosa, said clearance of backlogs of FX forwards will bring back confidence in the traditional market.
“The new move by CBN to clear backlogs with international lenders gives the signal that the apex bank is back in trading and business. Apart from bringing back letters of credit, it generally brings back confidence in the traditional market. It restores the confidence of portfolio investors and international airlines. It will also bring foreign direct investments,” Idahosa added.