Naira’s fall continues as CBN releases another $500 million for forex backlog

The Central Bank of Nigeria (CBN) says it has released $500 million to various sectors in its effort to address the backlog of foreign exchange forward transactions.

Forward allows businesses to buy dollars that will be delivered to them at a future date at a pre-determined price, as a way of hedging against exchange rate fluctuations.

The central bank said last year it had an outstanding of over $6 billion in uncleared dollar obligations, and said settling the backlog was a priority in its effort to ease the dollar shortage that has pushed the naira to a record low.

The local currency fell below 1450 to a dollar on the black market on Monday, and fell to 1421 during intraday trading on the official market, according to Reuters.

Hakama Sidi-Ali, CBN’s acting director, corporate communications, said this in a statement on that the latest payments came a week after the bank paid $2.0 billion to settle outstanding dollar commitments across manufacturing, aviation, and petroleum sectors.

“As the Governor said, the CBN’s focus is on addressing fundamental issues that have hindered the effective operation of the Nigerian FX markets over the years,” she said.

Mrs Sidi-Ali said that the forex market reforms were designed to streamline and unify multiple exchange rates, foster transparency, and reduce arbitrage opportunities.

She expressed confidence that a stable exchange rate would boost investor confidence and attract foreign investment.