Finance minister Olawale Edun says Nigeria has to clear a $6.8 billion backlog of foreign exchange forward payments before the naira stabilizes.
Forward contracts allow businesses, typically, buy foreign exchange from the Central Bank of Nigeria at a future date, and at an agreed-upon exchange rate.
Edun said resolving overdue contracts would allow the naira to strengthen and “pave the way for additional foreign exchange flows, according to Bloomberg.
“The issue we have now is that the market is not liquid enough,” he said in an interview.
“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.”
Currency crisis again
The naira has fallen more than 60% since the new government of President Bola Tinubu in June removed controls and allowed the currency trade more freely.
The currency has seen a steep drop this week, reaching a record low of 995 to the U.S. dollar on the black market. It gained sharply on Thursday on the official market, closing at 738 compared to 770.7 a day earlier.
The naira rose briefly in August after the CBN said it would intervene, and yet again fell despite an announcement by the state-oil company NNPC that it had secured a $3.5 billion loan to support the currency.
The CBN on Thursday postponed its policy meeting scheduled for this week till further notice, deferring decisions on interest rates and the currency.
The latest plunge comes as President Bola Tinubu said in New York on Wednesday that his currency reforms will allow investors “take in your money and bring out your money” without “bottlenecks.”
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