Foreign Currency

Nigeria’s central bank steps up FX settlement, naira still under pressure

Nigeria’s central bank stepped up its settlement of outstanding forwards with an additional $500 million payout to clear a dollar demand backlog, a spokesperson said, but forex shortages continued to drive the naira currency into a tailspin.

The naira on Friday fell to a record low of 1,421 per dollar, FMDQ Exchange data showed, to overtake levels seen on the unofficial parallel market, where the currency trades freely.

Africa’s biggest economy has about $7 billion in forex forwards that have matured, a major concern for investors as foreign currency shortages continue to weigh down the naira currency, despite assurances by the Central Bank of Nigeria (CBN) that it would clear the backlog.

The naira’s official exchange rate has been drifting towards the parallel market level as the central bank is yet to clear outstanding amounts owed in forward deals, worsening a shortage of foreign-currency in the West African nation.

Earlier this month, the bank paid about $2 billion of the backlog across sectors such as manufacturing, aviation and petroleum, CBN spokesperson Hakama Sidi Ali said.

Sidi Ali said the CBN had begun implementing a comprehensive strategy to improve liquidity in the Nigerian foreign exchange markets in the short, medium, and long term.

She added that the bank was committed to settling all legitimate foreign exchange backlog within a short time frame.

(Reporting by Camillus Eboh; Writing by Chijioke Ohuocha; Editing by Jon Boyle and Alex Richardson)

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