THE Nigerian currency lost N456.73 to the dollar on Monday, January 29, to close at N1,348.63/$1 at the official window, despite the Central Bank of Nigeria’s (CBN) clearance of $500 million foreign exchange (FX) backlog.
The plunge was the worst witnessed recently as the naira depreciated by 33.87 per cent from N891.90/$1 on a single day on Monday, January 29.
At the parallel or black market, the naira also depreciated by 2.43 per cent to N1,440 from N1,405 to $1.
On Monday, the CBN acting director of Corporate Communications, Hakama Sidi-Ali, was reported to have said the apex bank released $500 million to various sectors to clear the backlog of “verified” FX transactions.
She reiterated that the move was part of CBN’s plan to improve liquidity in the Nigerian FX markets in the short, medium, and long term.
“As the Governor said, the CBN’s focus is on addressing fundamental issues that have hindered the effective operation of the Nigerian FX markets over the years,” Sidi-Ali said.
She stressed that the FX market reforms were designed to streamline and unify multiple exchange rates, foster transparency, and reduce arbitrage opportunities.
Sidi-Ali believes a stable exchange rate would boost investor confidence and attract foreign investment, stressing that transparency in the market would enable the fair determination of exchange rates and, by extension, guarantee stability for businesses and individuals.
However, the naira has continued to witness a loss in value against the dollar as CBN has been releasing various sums to clear the FX backlog since the beginning of the year.
On January 17, CBN said it had cleared a $2 billion FX backlog to settle outstanding commitments across manufacturing, aviation, and petroleum sectors.
On January 7, the apex bank said it paid an initial $61 million to address the $800 million owed to foreign airlines.
However, the country has about $7 billion in FX forwards that have matured.
This is a significant concern for investors as foreign currency shortages continue to weigh down the naira despite assurances by CBN to clear the backlog.