Naira to Dollar hits N1000/$1, two weeks after CBN promise to clear $10 billion backlog

Acting Governor of CBN, Folashodun Shonubi.

Nigeria’s Forex Crisis Deepens as Naira Continues to Depreciate, Despite Central Bank’s Promises

The foreign exchange market in Nigeria remains in turmoil as the exchange rate between the naira and the dollar hovers around N1000/$1, leaving forex traders grappling with scarcity and uncertainty. Reports indicate that the naira weakened further to N983/$1, with social media buzz even quoting it at N1000/$1, casting a shadow of doubt over the stability of the nation’s currency.

As of this morning, peer-to-peer (P2P) platforms are trading the naira at N984, exacerbating concerns over the currency’s volatility. Meanwhile, the official NIFEX window closed with the exchange rate at N770.7/$1.

It has been precisely two weeks since the Central Bank of Nigeria (CBN) announced its collaboration with commercial banks to clear a substantial $10 billion foreign exchange backlog within a fortnight. This revelation came from the acting Governor of the CBN, Folashodun Shonubi, during a forum where he addressed the persistent challenges in the foreign exchange market.

Shonubi reassured that the backlog would be resolved through various structures within the forex market, with banks, which account for 75% of forex transactions, playing a significant role in this endeavor.

However, rather than witnessing improved liquidity, the forex market seems to be spiraling into deeper turmoil, leading to further depreciation of the naira. Market operators have expressed dismay at the current state of affairs, describing it as “disarray.”

A senior official from the Association of Bureau De Change Operators of Nigeria (ABCON), who wished to remain anonymous, highlighted the dire situation in the forex market. He noted that most licensed operators are now unable to source dollars for sale, effectively rendering them out of business. The prevailing scarcity has led to increased activity in the parallel or black market.

The official further emphasized the complexity of the forex market, with various rates emerging, including those from platforms like Binance and Dubai, in addition to local parallel market rates.

During a recent Nairametrics ClubHouse session, experts questioned the feasibility of the CBN’s plan to enhance forex liquidity within two weeks. They underscored the challenges of such a short timeframe, expressing hope that the central bank possesses a concrete plan to execute.

The naira’s depreciation comes at a critical juncture as President Muhammadu Buhari embarks on a trip to New York for the United Nations General Assembly (UNGA), aimed at attracting foreign direct investment (FDI) into Nigeria. However, the U.S. Deputy Secretary of Treasury, Wally Adeyemo, has raised concerns about Nigeria’s macroeconomic framework’s readiness to draw in dollar-denominated FDI. Adeyemo stressed the need for further economic reforms to make Nigeria an attractive FDI destination.

As the forex crisis deepens and the naira’s value remains uncertain, Nigeria faces significant challenges in restoring stability to its currency and boosting investor confidence in its economy.