The Nigerian naira has experienced a significant depreciation of 26.36 percent against the US dollar at the official Investor and Exporter window of the foreign exchange market. This depreciation occurred after the Central Bank of Nigeria (CBN) announced that it had cleared $2 billion as part of its backlog obligations.

The CBN made this announcement on Monday, revealing that it had fulfilled $2 billion worth of its forward contract obligations. Additionally, it disclosed that it had disbursed $61.64 million to foreign airlines as part of the matured foreign exchange obligations.

This development indicates a substantial loss in the value of the naira against the US dollar in the official foreign exchange market following the clearance of the backlog obligations by the Central Bank of Nigeria.

The CBN Acting Director of Corporate Communications, Hakama Sidi Alia, said, “These payments signify the CBN’s ongoing efforts to settle all remaining valid forward transactions, to alleviate the current pressure on the country’s exchange rate.informationguidenigeria

“It is anticipated that this initiative by the CBN should provide a considerable boost to the Naira hug against other major world currencies and further increase investor confidence in the Nigeria economy.”

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Commenting on why the naira has continued to fall, the Chief Executive Officer, Economic Associates, Dr Ayo Teriba, stated that the volatility of the naira is because of inadequate foreign exchange supply.

He told The PUNCH, “Reserves are low and declining, the CBN is known to be in arrears on some of its obligations. It has started clearing its arrears and has pledged to clear all of it in due course.”JAMB Result

He stated that the government has been making efforts to boost FX supply through investments, but these are yet to materialise, yet. He noted that if the government can be more open to investors, the country would get the forex it needs to boost reserves and meet the demand in the FX market.

He declared, “I want to see the N1000/$ as a reflection of FX shortages.” Teriba highlighted that the recent inflow of $2.3bn as crude forwards won’t solve the country’s supply issues.NYSC Portal

He said, “I don’t expect the volatility to be as high as it was in 2023.” He however hinged this prediction on three factors. He explained, “One because with the coming onstream of the local refineries, there will be less demand on forex. This should hopefully help boost the value of the naira. Two, if the government can generate more revenue without recourse to Ways and Means, this would reduce the inflation rate.informationguidenigeria

“The third factor is boosting oil production. Improving the supply of oil and increasing foreign exchange for the economy will boost the value of the naira.”

When The PUNCH asked him about his prediction for the rate of the national currency, he said, “In the short to medium term the naira may be around N1000/$ but towards the end of year as things improve the naira may firm to about N900/$.”JAMB Portal

According to Financial Derivatives Company, the naira is set to remain under pressure in 2024 since the apex bank has little firepower to defend the currency.

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