The Central Bank of Nigeria (CBN) has begun to settle the foreign exchange (FX) forwards backlog in banks, a source in the apex bank confirmed to TheCable on Wednesday.
The FX forwards backlog, which amounted to about $2 billion, was one of the factors that contributed to the depreciation of the naira in recent months, according to the finance minister and coordinating minister of the economy, Wale Edun.
Edun had said on September 22 that clearing the backlog would increase the FX supply in the market and strengthen the naira against the dollar.
Charles Abuede, the chief economist and researcher at Cowry Asset Management Limited, told TheCable that the CBN’s move was a positive development for the Nigerian economy, the FX market, the naira, and the country’s gross external reserves.
He said that more than 10 banks, including Stanbic IBTC, Citi Bank, Standard Chartered, UBA, Heritage, Keystone, Signature, Parallex, Greenwich Merchant, and others, had received payments from the CBN.
He also said that the gross external reserves had increased gradually in recent days, indicating a positive sign for dollar inflow and some relief for the naira.
“Additionally, we anticipate that this move will lead to a more favorable interaction of the local currency in the foreign exchange market, aligning with the exchange rate movements between the naira and the U.S. dollar, where the Naira has been appreciating in various FX segments,” he said.
“Furthermore, this step is expected to improve Nigeria’s credit ratings from international rating agencies.”
Abuede said that the FX backlog had negatively affected Nigeria’s status in the business community, as some rating agencies had announced plans to downgrade or reclassify Nigeria’s indexes due to the FX challenges.
He cited the examples of Russel FTSE and MSCI, which had revealed their intentions to downgrade or reclassify Nigeria’s indexes from frontier to ‘unclassified’ or ‘standalone’ status, respectively, by 2024, due to the unsettled forex.