The naira has made a tremendous improvement against the dollar at the parallel market as it closed strongly.
File photo
The naira has recorded a shock improvement against the dollar
following the new foreign policy introduced by the Central Bank of
Nigeria on Wednesday.
There was fear after the naira traded N520 to a dollar on Monday.
However with the new policy in place, the naira gained tremendously as
it exchanged N502 to a dollar on Wednesday night.
Traders also noted that the buy rate of the greenback improved
below N490 to the dollar as currency hoarders who had held on to the
dollar for several weeks rushed to sell off the currency following the
renewed confidence in the CBN’s ability to meet forex demand.
Also, global ratings agency, Fitch Ratings said on Wednesday that
the new forex policy announced by the CBN would ease forex scarcity and
banks’ pressure.
According to the statement released by Fitch Ratings, the most
important part of the CBN’s announcement was the normalisation of the
interbank market.
The intention of the CBN to clear forex backlog of overdue foreign
currency obligations owe by banks to international creditors, and the
fact that the apex bank will no longer have a say on how banks on-lend
the foreign currency they access from it, will strengthen banks and
allow them to focus on what really matter.
The CBN had on Monday removed the preferential treatment for
certain sectors of the economy, explaining that although providing forex
for the manufacturing sector remain a priority, banks can now lend
foreign currency they procure from it as they deem fit.
The apex bank also reaffirmed its intention to increase forex
supplies at the interbank market and reduce banks’ waiting time for
delivery of foreign currency to 60 days from 180 days via its forward
sales contracts.
“This should help banks make more timely payments to creditors,
speeding up the flow of currency to importers and helping the economy.
“The CBN’s initiatives are an important boost for banks as
access to foreign currency liquidity is tight and banks have struggled
to meet their foreign currency obligations.
“Nigeria is highly dependent on imports and Nigerian banks have long provided trade finance facilities to importers.
“Currency scarcity and exchange rate weakness have made it
harder for importers reliant on naira-denominated cash flows to service
US dollar-denominated trade finance lines, forcing some banks to
restructure their obligations with international correspondent banks
last year.
“Correspondent creditor banks agreed to maturity extensions and were duly compensated for this,” Fitch explained.
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