CBN To Clear $1bn Forex Demand Backlog
The Central Bank of Nigeria (CBN) is expected to clear over $1 billion forex demand backlog as it resumes sales of $100 million weekly after the five-week lockdown in Lagos and Abuja was called off.
There is an estimated $1 billion backlog of unmet dollar demand, investment banking firm FBN Quest said in emailed note to investors on May 7.
The Small and Medium Enterprises (SMEs) and end users are to get $100 million weekly sales based on CBN’s new policy on forex interventions.
Dollar demand has been swelling and piling up pressure on the naira. Importers with due obligations have been scrambling for hard currency while providers of foreign exchange, such as offshore investors, have exited.
But the Manufacturers Association of Nigeria (MAN) said its members could not access dollars as the impact of the coronavirus pandemic and fall in oil prices had cut the flow of foreign currency. “It was pretty difficult to source forex from all the available windows,” the group said.
MAN said its members have had problems accessing foreign currencies for five weeks partly due to lack of CBN’s interventions, the manufacturers group said.
The CBN in March moved to devalue the naira when they adjusted the official rate to N360 per dollar from N307 and moved the rate at which investors and exporters could purchase the greenback to N380 from N366. This has not reduced the pressure on the local currency which trades at N445 per dollar in the parallel market, indicating it could weaken further.
The lack of access to foreign exchange by local manufacturers is hampering their ability to import vital raw materials, machines and spares that are not available locally, the group said.
The central bank needs to “prioritise improved access to foreign exchange for operators in the real sector” to enable them acquire inputs that are not available in the country.
The five-year naira futures has also slid past N550 to the dollar after the CBN weakened the naira on the derivatives market, signaling more pain to come for the currency, traders said.
The CBN had softened the currency on average by N73 across tenors, traders said, with the one-year maturity revised by N27. The 5-year naira futures, introduced in February, weakened to N569 per dollar from N413.
The naira has been hitting new lows on the black and over-the-counter spot markets since March after the CBN adjusted its official rate, implying a 15 per cent devaluation. An oil price crash last month, triggered by a coronavirus pandemic, also worsened dollar shortages.
The CBN devalued the official currency rate two months ago in a move to converge a multiple exchange rates regime which it has used to manage pressure on the naira. But dollar shortages has caused the gap between the black market and official market to widen especially after the bank suspended dollar sales in the wake of a coronavirus lockdown.
