Nigeria central bank pays nearly $2 billion towards FX backlog

AFRICAN BUSINESS AND ECONOMYJanuary 10, 2024 at 10:19 PM UTC

TLDR

Nigeria's central bank has paid nearly $2 billion in outstanding forex forwards over the last three months.
The bank is addressing concerns related to the maturity of approximately $7 billion in forex forwards.
Despite these efforts, forex shortages continue to impact the country's currency, the naira.

Nigeria's central bank has disclosed that it has paid nearly $2 billion in outstanding foreign exchange forwards over the last three months. This effort is part of a strategy to clear a backlog of dollars and address concerns related to the maturity of approximately $7 billion in forex forwards, which has been a significant worry for investors.

The Central Bank of Nigeria (CBN) has pledged to settle these maturing forex forwards to enhance confidence in the foreign exchange market. The acting spokesperson for the CBN, Hakama Sadi Ali, stated that the bank has, in the past three months, redeemed outstanding forward liabilities amounting to almost $2 billion.

This move underscores the central bank's commitment to resolving pending obligations and promoting the functionality of the foreign exchange market. Despite these efforts, forex shortages persist and continue to impact the country's currency, the naira.

Key Takeaways

Nigeria's foreign currency shortages have been exacerbated by a decline in oil production, the country's primary export that contributes to over 90% of dollar inflows. To address this challenge, the Central Bank of Nigeria (CBN) recently made a payment of $61.64 million to foreign airlines. These airlines had sold tickets in the local currency, the naira, but were unable to repatriate their funds out of the country. As of the end of November, foreign airlines were owed more than $700 million. In response to the ongoing currency issues, President Bola Tinubu has pledged to enhance foreign currency inflows into Nigeria through measures such as attracting new investments, increasing oil production, and implementing reforms in the foreign exchange market. These efforts aim to mitigate the impact of the foreign currency shortages and stabilize the Nigerian economy.

Forex

Foreign Currency

Naira

Nigeria

CBN