Adebayo Olawale Edun, Nigeria’s Finance Minister has said that up to $6.8 billion of overdue forward payments in the foreign exchange market was responsible for the slump in the naira and until it is addressed before the local currency can stabilise. This is according to Bloomberg.
He explained that if we can resolve these unpaid contracts, it will help the naira become stronger and “pave the way for additional foreign exchange flows.”
The naira has been losing value for several months, and in the parallel market on Thursday, it was approaching the 1000 naira per dollar mark. This happened because the central bank didn’t provide enough dollars to this market.
“The issue we have now is that the market is not liquid enough,” Edun, who accompanied President Bola Tinubu to New York for the United Nations General Assembly, said in a recent interview there. “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.”
Nigeria’s central bank had to delay a meeting that was supposed to take place on September 25–26 because they are waiting to confirm their new governor, Olayemi Cardoso, who used to work at Citigroup. Meanwhile, the acting governor and four deputy governors have resigned, which has left a gap in making important decisions.
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This month, the central bank hasn’t been very active, and some people say they haven’t provided many dollars through the official channels. This lack of supply has caused the naira to lose value quickly, dropping from around 900 naira per dollar at the beginning of September.
Because the central bank isn’t supplying enough dollars, people are having to go to the streets to find foreign currency. Also, inflation in Nigeria, the biggest economy in Africa, is the highest it has been in over 18 years.
Economists are now predicting that the central bank will increase interest rates at their next meeting, but we don’t know when that meeting will happen because it has been postponed to an unknown 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. “Looking at all options for boosting supply so the one-way bet of speculators that we are seeing at the moment is reversed.”
