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Uncertainty lingers over future of naira



Anxiety lingers over fate of naira as speculators exploit CBN low funding

…as speculation, adverse perceptions hobble its recovery




Despite the Federal Government’s valiant efforts to shore up the value of the naira, the nation’s battered currency has continued its depreciation trend against the dollar and other foreign currencies in the foreign exchange market.

At the close of trading on Friday, October 27, the Naira closed at N789.94 at the official NAFEM window, while it exchanged at the average rate of N1,220 (buy) and sell N1,230 (sell) at the parallel market.

A Bureau De Change (BDC) operator at the Lagos Airport Hotel on Obafemi Awolowo Road, Ikeja , Lagos, Abdullahi Danladi, said there is uncertainty over the future of the naira, a situation that is causing anxiety in the market.

“The situation is difficult to predict. On Monday (October 23), I bought at N1,235 and sold for N1,242. But today (October 27), I bought dollars at N1,150 and sold at N1,160″, Danladi stated.

On the reason behind the sudden appreciation of the naira in the spate of five days, Danladi attributed it to the flooding of the currency market with dollars by the Central Bank of Nigeria (CBN).

“We learnt the CBN had been flooding the official market (NAFEM) with dollars. That probably explains the present glut in the parallel market, which has crashed the exchange rates of not only the dollar, but other foreign currencies.

“I have stopped buying as I have more than enough forex on me. But I am worried that the trend (naira recovery) will continue on Monday”, the BDC operator lamented.

Business Hallmark findings revealed that the unexpected appreciation of the naira within a spate of one week could be attributed to two major reasons, CBN’s supplying more forex to the market, as well as the accretion of $326million dollars to Nigeria’s external reserves.

According to data obtained from the official NAFEM window, forex turnover for Friday was $259.84 million, representing a 129.50% increase, compared to the amount supplied on Thursday.

Also, data obtained from the official website of the CBN on Friday showed that the nation’s external reserves rose to $33.326 billion, maintaining a nine-day gaining streak that continues to keep it above the $33 billion mark recorded in July 2023.

Meanwhile, experts have identified reasons the naira has been slow in responding to the numerous stimuli put in place by the Federal Government to halt its further decline.

They include unmet backlog of accumulated forex demands; low forex reserves and lower crude oil production, amongst many other reasons.


While other factors militating against the naira are also strong, economic and financial experts blamed the continuous crash of the naira to the backlog of accumulated forex demand on the official market, which pushes businesses and individuals to source their forex need from the parallel market.

The declining inflow of Foreign Direct Investments (FDI) into the country and lower crude oil exports, which account for more than 90% and 80% of Nigeria’s export income and forex needs, checks revealed, contributed to forex demands accumulating to several billions of dollars.

According to the newly appointed CBN Governor, Yemi Cardoso, Nigeria has about $10 billion in forex forwards that are overdue. Banking sources informed BH that businesses, mostly foreign, had supplied good and forex to local firms and banks, which the CBN indemnified through letters of credits.

Unfortunately, banks were forced to repay the foreign credit lines with their own funds when the CBN failed to pay.

Owing to the huge forex backlogs, businesses are unable to get new letters of credit, as the CBN still owe banks huge dollars in unpaid commitments already paid out to foreign business concerns.

Though, the newly appointed CBN governor has promised to clear the forex backlogs soon, his failure to give a definite timeline is creating uncertainty in the forex market, which is affecting the naira and preventing it from recovering.

Also, the controversy that trailed the discrepancies in the nation’s actual foreign reserves, as well as its depletion, experts argued, are working against naira recovery.

While Nigeria’s foreign reserves have grown in the last two weeks by about $300million, it is $7billion short of the level it was in January.

Also, the naira has continued to be haunted by JPMorgan’s report that Nigeria’s net foreign reserves stood at $3.7 billion at the end of 2022, much lower than CBN”s estimates.

The CBN, it would be recalled, had in August 2023 stated in its audited report in five years that its reserves included a $19 billion commitment in derivatives – slashing the liquid amount of the reserves.

The revelation, experts declared, had done more damage to the naira than good.

In the same vein, Nigeria’s crude excess account only has $473,755 as at August 2023, down from a high of $20 billion in 2008. Successive administrations of former Presidents Musa Y’aradua, Goodluck Jonathan and Muhammadu Buhari had withdrew dollars to support the naira and augment budget spendings caused by prolonged revenue shortfalls.

Some analysts, who spoke on the continued volatility of the naira, argued that until some critical fundamentals are addressed, the Naira will continue to defy all efforts to save it.

“Given that the naira remains much weaker in the parallel market, further devaluation – and rises in inflation – are likely”, said Capital Economics, a leading provider of independent economic insights, forecasts, analysis and consultancy.

Also speaking, Head of Macro Strategy, FIM Partners UK Ltd, Charlie Robertson, maintained that while the $10billion the CBN promised to source to boost the economy and shore of the value of the naira would help, interest rate differential with dollar bonds will weigh against the naira.

According to Robertson, if domestic and foreign investors make similar amounts in dollar as naira, most will choose foreign exchange.


In his own submission, the Managing Director/CBO, Optimus by Afrinvest, Ayodeji Ebo, said that the $10billion being sourced by the Federal Government will go a long way in shoring up the value of the naira


“If the inflow actually comes in as indicated, it will stabilize the naira in the immediate. However, we need to block the leakages from oil theft to increase FX inflow to the CBN to sustain supply.

“$10billion is a huge amount but the question on everyone’s mind is if this is possible in the short term.

In the same vein, the Relationship Manager, Corporate Banking at FSDH Merchant Bank Limited, Ayodele Akinwunmi, agreed that the inflow of US$10 billion into the Nigerian economy and foreign exchange market will help to clear the backlog of FX obligations.

“This will help to stabilise the value of the Naira. However, as more FX is required by both government, businesses and households for various transactions, there is the need for the country to continue to generate foreign exchange earnings through export of goods and services so that it can avoid another round of excess demand of Dollar over supply”, Akinwunmi admonished.

It would be recalled that the naira had spiralled out of control after President Tinubu abolished the multiple exchange rates windows that was adopted by the CBN for several years in June.

According to the president, the decision was made to help unify the official and the parallel market windows, but that is yet to happen.

Troubled by the continued crash of the naira, the Federal Government had introduced several measures to stem the time. They include the recent lifting of the ban on 43 items prevented from getting forex from the CBN for their importation.

Also, the Federal Government has said that it would impose excise tax penalties on foreign exchange transactions done outside the official market window as part of the moves to discourage multiple exchange rates in the country.

The decision is one of the twenty recommendations presented by the Presidential Fiscal Policy and Tax Reform Committee to President Tinubu at the Presidential Villa, Abuja last week.

The Taiwo Oyedele-led Tax Committee had proposed a set of ‘quick win’ recommendations to the president to help tackle urgent economic concerns, such as the negative effects of fuel subsidy removal and exchange rate unification.

It also aims at controlling inflation and promoting economic growth.






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