In a remarkable turnaround, the Naira flexed its muscles against the US Dollar on Wednesday, scoring gains in both official and parallel markets. This resurgence coincided with a pivotal announcement from the Central Bank of Nigeria (CBN), signaling the final clearance of a whopping $7 billion backlog in foreign exchange claims, fulfilling a crucial commitment made by CBN Governor, Mr. Olayemi Cardoso.
Acting CBN Director of Corporate Communications, Mrs. Hakama Sidi Ali, confirmed the breakthrough in Abuja, highlighting that the CBN had already settled $1.5 billion of the backlog recently. This news sparked a flurry of activity, with the Naira closing trading at 1,410/dollar at the parallel market and N1,492 at the official Nigerian Autonomous Foreign Exchange Market (NAFEM), according to data compiled from the FMDQ Securities Exchange.
The gain of N68 or 4.5% at the official market and a whopping 13.5% or N190 at the parallel market reflect a significant boost in confidence, with speculators beginning to offload their dollar stocks amid decreased demand and CBN clampdowns.
A string of circulars issued by the CBN in recent weeks has effectively curtailed the activities of illegal Bureau De Change operators in major cities like Lagos, Abuja, and Kano, contributing to the Naira’s newfound stability.
Currency traders across the nation echoed mixed sentiments about the evolving landscape. While some hailed the Naira’s resurgence, others expressed concerns about selling at a loss due to dwindling demand for the greenback.
The positive trend is further bolstered by Nigeria’s growing foreign reserves, which surged by 3.62% to $34.37 billion as of March 12, 2024, according to CBN data. The apex bank’s recent focus on Diaspora remittances has also paid dividends, with remittances soaring by 433% to $1.3 billion in February alone.
Meanwhile, banks are implementing tighter scrutiny on forex requests, requiring customers to submit tax clearance certificates for the last three years when applying for Form A. This heightened oversight underscores the CBN’s commitment to transparency and accountability in forex transactions.
The Naira’s resurgence has garnered attention from global financial institutions, with Goldman Sachs predicting an appreciation to N1200 per US dollar within twelve months. This optimistic outlook reflects growing confidence in Nigeria’s monetary policies and efforts to shore up the Naira’s value.
As the nation navigates through economic uncertainties, the successful clearance of the FX backlog marks a pivotal moment in Nigeria’s financial landscape, setting the stage for a more resilient and stable economy. Stay tuned as the story unfolds, shaping Nigeria’s economic trajectory in the months to come.