Despite the Central Bank of Nigeria’s (CBN) pledge to clear over $10 billion in foreign exchange debts owed to Deposit Money Banks, the debt remains unpaid, leaving banks grappling with a tight forex liquidity situation.
Naira exchange rates in the parallel market have surged, with rates hitting between 990/$ and 995/$, compelling many bank customers to resort to the black market.
Bureau De Change operators in Lagos, Abuja, and Kano are lamenting dollar scarcity, with rates as high as 1,000/$.
Naira appreciates on I&E forex window
While the naira appreciated on the Investor & Exporter forex window to 747.76/$, up from 772.98/$, manufacturers fear that further naira depreciation will lead to increased production costs, resulting in higher prices for goods and potential factory shutdowns.
The immediate past acting CBN Governor, Folashodun Shonubi, had announced on September 6, 2023, that the apex bank had finalized negotiations on dollar debts with commercial banks, promising that all forex exchange backlogs would be cleared within one to two weeks.
However, top bank executives have revealed that the CBN has yet to fulfill this promise, causing banks to suspend various FX transactions.
Reports indicate that the CBN owes over $10 billion in forward contracts and dollar swap deals, although the CBN has disputed this figure.
The CBN’s delay in clearing these debts is exacerbating Nigeria’s forex liquidity crisis, prompting calls for immediate intervention in the sector.
Manufacturers are concerned that the worsening naira value will result in higher prices for products and further factory closures.
The President of the Manufacturers Association of Nigeria, Francis Meshioye, stressed that the depreciating naira would significantly impact manufacturers’ ability to access foreign exchange for raw materials, leading to increased production costs.
Meshioye called on the government to take action to stabilize the exchange rate and ensure that it does not soar to unreasonable levels.
The CBN recently introduced operational mechanisms for Bureau De Change (BDC) operators to trade foreign currencies at rates similar to those on the Investor & Exporter forex window.
The circular from the CBN stated that the spread on buying and selling by BDC operators should be within an allowable limit of -2.5% to +2.5% of the Nigerian exchange market window weighted average rate of the previous day.
The move is aimed at enhancing liquidity in the forex market and encouraging more Diaspora remittances.
The CBN has not provided immediate comments on the situation, leaving banks and manufacturers grappling with the ongoing forex debt crisis and its economic consequences