The Central Bank of Nigeria (CBN) has announced the successful clearance of all outstanding forex forward contracts, a move that has triggered significant adjustments in exchange rate expectations among forex dealers. The CBN’s action comes as a relief to market participants and is expected to ease pressure on the foreign exchange market.
According to a statement from the acting director of corporate communications, Sidi Ali, the CBN, under the leadership of Governor Oluyemi Cardoso, has settled a backlog of $7 billion in forex claims. This fulfillment of obligations is in line with the CBN’s commitment to resolving outstanding forex liabilities, as stated by Governor Cardoso.
The clearance of the forex backlog is part of the broader strategy outlined in the recent Monetary Policy Committee meeting aimed at stabilizing the exchange rate, curbing imported inflation, and boosting confidence in the banking system and the economy.
Simultaneously, the CBN has reported a surge in remittance payments from Nigerians abroad through official channels, along with heightened interest from foreign investors in local assets, including government debt securities. These developments have contributed to a significant increase in Nigeria’s external reserves, which have reached $34.11 billion as of March 7, 2024, the highest level in eight months.
As a result of increased liquidity and improved investor confidence, the Nigerian naira has strengthened against the US dollar, trading below N1,500/$. Forex traders now anticipate further appreciation of the naira, with expectations of reaching N1,200/$ in the near term and even aiming for N1,300/$.
The positive outlook for the naira is bolstered by recent predictions from two UK-based financial institutions, Goldman Sachs and Standard Chartered, which foresee a stronger performance of the naira against the dollar in 2024. These forecasts are based on ongoing reforms implemented by the Cardoso-led CBN, which have already contributed to the naira’s recent appreciation to N1572.86/$.
Overall, the CBN’s successful clearance of forex debts has injected optimism into the foreign exchange market, paving the way for a more stable and favorable exchange rate environment in Nigeria.
