Naira Rebounds to N1,400/$ as CBN Clears Forex Backlogs
The Nigerian naira experienced a significant rebound against the United States dollar in both the official and parallel markets. This resurgence followed the Central Bank of Nigeria's announcement of the final settlements of all valid foreign exchange backlogs, amounting to $7 billion. The Acting CBN Director, Corporate Communications, Mrs. Hakama Sidi Ali, disclosed this achievement in Abuja, highlighting the recent clearance of $1.5 billion from the backlogs.
The naira closed trading at 1,410/dollar at the parallel market and N1,492 at the official Nigerian Autonomous Foreign Exchange Market (NAFEM). This represents an appreciation of N68 or 4.5% at NAFEM and a gain of 13.5% or N190 at the parallel market.
Speculators have begun offloading their dollar stocks, contributing to the naira's recent gains. The Central Bank of Nigeria's interventions and clampdowns on illegal Bureau De Change (BDC) operators have also contributed to reducing the volatility of the naira.
Bureau De Change operators in various locations, including Abuja and Lagos, reported transactions with the dollar ranging from N1400/$1 to N1450/$1. The reduced demand for the dollar has weakened its value against the naira in recent weeks.
The improved liquidity in the foreign exchange market is attributed to the increased foreign currency reserves, which grew by 3.62% to $34.37 billion as of March 12, 2024. Additionally, Diaspora remittances surged by 433% to reach $1.3 billion in February, compared to $300 million in January.
The successful clearance of the FX backlogs aligns with the Central Bank of Nigeria's comprehensive strategy to stabilize the exchange rate, curb imported inflation, and bolster confidence in the banking system and the economy. The clearance signifies a pivotal moment in Nigeria's financial landscape, offering renewed confidence to investors and businesses.
Some banks have also revised their forex application requirements, now requesting customers to submit tax clearance certificates for the last three years when applying for Form A. This requirement aims to ensure compliance with tax obligations and enhance transparency in foreign exchange transactions.
Overall, the recent developments signal positive strides towards stabilizing the Nigerian economy and restoring confidence in its financial markets.
