Analysts forecasted that the naira will strengthen in the upcoming months, as the Central Bank of Nigeria (CBN) settled over $1.3 billion in foreign currency (forex) forward contracts last week.
According to analysts at Rand Merchant Bank in Lagos, the settlement leaves an outstanding FX forwards contract with an estimated $198 million in unpaid balances between now and December.
The Nation reported that less forex pressure will be applied to the naira due to the decreased volume of unsettled forex contracts, which will assist in recovering the local currency.
The CBN has persisted in taking specific actions to increase dollar liquidity and aid in the naira’s recovery on both the official and black markets in recent times.
The bank recently authorised International Oil Companies (IOCs) operating in Nigeria to sell 50% of their forex revenues at the local forex market, a part of a significant drive to increase the availability of foreign exchange in the economy.
Hassan Mahmud, the CBN’s director of the Trade & Exchange Department, issued a circular to authorised dealer banks that reiterated the previous instruction to the IOCs to pay half of the currency proceeds immediately back to their home countries and the remaining half after ninety days.
But, during the allotted ninety days, the remaining fifty per cent of the repatriated funds might now be utilised to pay local debts whenever needed.
Additionally, the top bank mandated that all authorised dealers only provide debit or credit cardsâas alternatives to cashâto its clients for Personal and Business Travel Allowances (PTA/BTA).
The bank said,
The official foreign exchange market and the black markets are becoming less and less reliable sources of the money importers need.
Demand for Form A applications for Business Travel Allowance (BTA), Personal Travel Allowance (PTA), school fees, and medical payments is being driven by legitimate needs.
Evidence from the use of Form Q depicted that Small and Medium Enterprises (SMEs) are also struggling with scarcity.
One street trader disclosed,
TimesNow.com.ng reported that Nigeria has paid 98% of the airlines that have funds stuck in the country and has requested the final clearance of the remaining 2%, the International Air Transport Association (IATA).
According to IATA Director General Willie Walsh in a This Day report, the amount of airline funds that governments are preventing from being repatriated has decreased overall by 28%.
He estimated that the entire amount of blocked money at the end of April 2024 was around $1.8 billion, a decrease of $708 million (or 28%) from December 2023.
Source: TimesNow.com.ng
