The naira weakened on Wednesday despite efforts by the central bank to clear a backlog of matured foreign-exchange forward contracts. The naira fell to around 1,150 naira per dollar on the parallel market, from 1,070 the previous day.
This reversal followed a brief period of strength last week after the central bank announced it had cleared foreign-currency contracts with an unspecified number of banks. Analysts say that a significant amount of unsettled forward contracts remains.
The naira also closed weaker in official trade at 870 per dollar on Tuesday, compared with 809 the previous day.
Airlines have a large backlog of unmet requests for dollars to repatriate income, and the International Air Transport Association has said that its members have more than $800 million stuck in Nigeria.
Finance Minister Wale Edun said in October that the government expects to attract $10 billion of inflows in the coming weeks to help clear the backlog, ease liquidity, and stabilize the currency.
Floating the naira
The government allowed the naira trade more freely in June, hoping to attract more dollar inflows and improve liquidity that had dried up after years of pegging the naira to the dollar. Dollar inflows failed to materialize, however, as foreign investors instead waited for the central bank to clear a backlog of overdue dollar liabilities estimated at $6.8 billion.
The scarcity of dollars in Nigeria has forced buyers looking for hard currency onto the streets of the country’s cities, where the naira changed hands at 1,167 per dollar on Thursday.
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