Naira Falls Further To N995/$ on Parallel Market, Edun Blames $6.8bn Backlog for Currency’s Woes

The naira declined further on the parallel market arm of the foreign exchange (FX) market to N995 to a dollar, weaker than the N990 to a dollar it closed the previous day.

On the other hand, on the Investors and Exporters (I&E) FX window, the naira gained N33 naira to close at N738 to a dollar on Thursday, compared to N771 to a dollar the previous day, even as some market analysts attributed the development to a likely intervention by the Central Bank of Nigeria (CBN).

However, reacting to the pressure facing the nation’s currency, Nigeria’s Finance Minister and Coordinating Minister of the Economy, Olawale Edun, on Thursday said up to $6.8 billion of overdue forward payments in the foreign exchange market needed to be addressed before the naira stabilises.

This was just as the Monetary Policy Committee (MPC) of the CBN, on Thursday, announced the postponement of the 293rd meeting of the Monetary Policy Committee (MPC) of the CBN till further notice, which analysts argued may further elevate uncertainty in the market.

According to a source, the intervention by the market regulator on the I &E FX Window, was responsible for the significant rise in the daily volume turnover which climbed to $218.68 million on Thursday, compared to a volume of $64.36 million recorded the previous day, representing a surge by 239.54 per cent.

Also, the highest spot rate of the day was pegged at N799.9/$1 while its lowest spot was exchanged at N701/$1.

With the parallel market at N995/$1 and the official I&E window closing at N738, the gap between the official and parallel market has widened to N257

Edun, on Thursday disclosed that up to $6.8 billion of overdue forward payments in the FX market needed to be addressed before the naira stabilises.

The currency of Africa’s largest economy extended a months-long slide and hurtled toward the 1000-per-dollar mark in street trading yesterday, as the central bank held back from supplying dollars to a panic-stricken market.

Edun, who was named to his role last month, told Bloomberg in New York, that resolving the overdue contracts would allow the naira to strengthen and “pave the way for additional foreign exchange flows.

“The issue we have now is that the market is not liquid enough,” Edun said in the interview.

He added: “We are committed to encouraging liquidity based on reforms that have been made at the moment, on the fiscal side and the monetary side. And together with the restoration of trust and confidence we think the FX flows will return.”

The central bank has mostly been on the sidelines this month, according to market players, with one person saying it has barely supplied dollars to the official window.

That has helped accelerate the naira’s slide. Shrinking dollar supply from the central bank is forcing buyers onto the streets for hard currency.

Inflation in Africa’s biggest economy is also at the highest in more than 18 years, prompting economists to predict that the central bank would raise interest rates again at its next meeting, which for now has been deferred to an unknown future date.

“The commitment is to maintain the existing reforms and improving them. Improving the FX market further so the gap narrows,” the finance minister said.

“(We are) Looking at all options for boosting supply so the one-way bet of speculators that we are seeing at the moment is reversed,” he stressed.

Nigeria gets over 90 per cent of its foreign exchange from oil and gas export, but has in recent years been starved of dollars as the Nigerian National Petroleum Company Limited (NNPC) is unable to pump enough crude for sale.

Meanwhile, the MPC yesterday announced the postponement of its 293rd meeting till further notice.

The meeting was initially scheduled for Monday and Tuesday, September 25 and 26, 2023, respectively.

However, in a statement issued by CBN Director, Corporate Communications Department, Dr. Isa AbdulMumin, the bank said a new date would be communicated in due course.

“We regret any inconvenience this change may cause our stakeholders and the general public,” the statement added.

The deferment may not be unconnected in with the leadership vacuum at the apex bank following successive change of guards occasioned by the removal of former CBN Governor, Mr. Godwin Emefiele in June.

On June 9, 2023, Tinubu suspended Emefiele from office sequel to an ongoing investigation of his office and the planned reforms in the financial sector. 

Emefiele was directed to immediately hand over the affairs of his office to the Deputy Governor, Operations Directorate, Mr. Folashodun Shonubi, who would act as the Central Bank Governor pending the conclusion of the investigation and the reforms.

Analysts, however, believed the suspension was a political and personal vendetta against the former apex bank’s governor.

In the buildup to the 2023 presidential elections, Tinubu had accused Emefiele of plotting to thwart his chances of becoming president by implementing the cashless policy as well as redesigning the local currency.

Emefiele had denied all the allegations,  insisting the policies were not targeted at any individual but in the public interest. 

However, four months into Shonubi’s reign, Tinubu on September 15, 2023, nominated the former head of Citibank in Nigeria, Olayemi Cardoso, to serve as the new central bank governor, days before its next crucial MPC meeting.

Given that Cardoso’s nomination is subject to the Senate approval, and the fact that he was yet to officially resume at the apex bank, a vacuum is already created ahead of the MPC meeting which would have been the first to be presided over by Cardoso.

Shonubi, in his acting capacity, presided over the last MPC meeting held in July.

James Emejo, Emmanuel Addeh and Nume Ekeghe

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