Naira appreciates to N1,382/$ after $7bn FX settlement

The local currency continued on a recovery note on Thursday with naira appreciating significantly against the dollar on the strength of recent interventions by the Central Bank of Nigeria (CBN), Daily Trust can report. From N1,536.83 in the previous day, the naira appreciated to N1,382.35/$ at the Nigerian Autonomous Foreign Exchange Market (NAFEM), the first […]

The local currency continued on a recovery note on Thursday with naira appreciating significantly against the dollar on the strength of recent interventions by the Central Bank of Nigeria (CBN), Daily Trust can report.

From N1,536.83 in the previous day, the naira appreciated to N1,382.35/$ at the Nigerian Autonomous Foreign Exchange Market (NAFEM), the first time in a long while that the local currency would record such a massive gain.

This was coming 24 hours after the Central Bank of Nigeria (CBN) announced it had cleared $7bn valid foreign exchange claims while increasing the country’s forex reserves.

CBN’s Acting Director of Corporate Communications, Hakama Sidi-Ali, announced this in a statement on Wednesday.

The statement partly reads, “The Central Bank of Nigeria has announced that all valid foreign exchange backlogs have now been settled, fulfilling a key pledge of the CBN Governor, Mr Olayemi Cardoso, to process an inherited backlog of $7bn in claims. 

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“Clearance of the foreign exchange transactions backlog is part of the overall strategy detailed in last month’s Monetary Policy Committee meeting to stabilise the exchange rate and thereby curb imported inflation, spurring confidence in the banking system and the economy.

Naira rebounds

Apart from the massive gain recorded at the official market, the local currency also stabilised yesterday at the parallel market exchanging at N1,500 to a dollar, according to checks by our correspondents in Lagos, Abuja and Kano.

In Lagos, the dollar was traded at N1,500 to N1,520 yesterday with the operators confirming relative stability in the market.

A BDC operator, Haruna Agege, in a chat with our correspondent yesterday said the local currency is expected to appreciate against the dollars in days to come.

“So if you have dollars at home, it is advisable to bring it out,” he said.

In Abuja, a cross section of Bureau de Change operators in Wuse who spoke to Daily Trust stated that the dollar has been falling against the Naira since the beginning of the week.

Gidado Muktar, a BDC operator said, “We have been seeing a lot of changes since Monday when the week started. I can tell you that when we started the week, the dollar was N1,700 to a dollar. By Tuesday it dropped to N1,600 and as we speak today Thursday it is fluctuating between N1,480 to N1,500/$,” he said 

Mukhtar added that he is happy that the Naira is appreciating which vindicates his colleagues that were accused of speculation.

In Kano, Alhaji Yusuf Kura, a BDC operator said operators buy dollar at the rate of N1490 and sell to prospective customers at the rate N1500 . Previously it traded at N1,520, he said.

Controversy over foreign airlines’ funds

Despite CBN claiming it has cleared all verified backlogs, there is controversy over the foreign airlines’ trapped funds as the foreign airlines claimed their funds are still trapped with commercial banks.

It would be recalled that in January when the CBN announced it had cleared all foreign airlines’ trapped funds, the carriers said the bulk of the trapped funds from ticket sales on the billing settlement platform (BSP) of the International Air Transport Association (IATA) is yet to be cleared.

A foreign airline representative who spoke on the condition of anonymity said, “Payments are being made as I write. Only IATA can confirm the value. This is because these monies are tickets sold via BSP. IATA manages the BSP. The bulk of the funds held are in the BSP. BSP sales make up about 70% of airline sales.”

President of the Association of Foreign Airline Representatives in Nigeria (AFARN), Dr. Kingsley Nwokoma said foreign airlines’ trapped funds remain uncleared. 

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President of the National Association of Nigerian Travel Agencies (NANTA), Mrs. Susan Akporiaye in a chat with Daily Trust said as it currently stands the Federal Government is not owing foreign airlines and asked the operators to sort out their issues with their commercial banks.

“The Federal Government is not owing the airlines. If the airlines still have some issues, it is the money with the commercial banks, not with the government and the CBN has also helped them as well by releasing the circular that the banks should sell to the airlines and we had report that the airlines have been getting their money although there is no update on whether the entire $700m has been cleared or not.

CBN taking the right step – Expert

Chief Executive Officer, Centre for the Promotion of Private Enterprises (CPPE), Dr. Muda Yusuf lauded the CBN interventions in the forex market, saying, “One of the ways to get out of this challenge is also to clear the backlogs so that gradually that would help to restore confidence and once confidence is restored, the speculative component of the pressure in the foreign exchange market will begin to diminish.

“This is because there are real demands and there are also speculative demands. So once the speculative components reduce drastically, we should begin to see some impact in terms of stability and in terms of appreciation of the currency.”

He however stated that it would take some time for the challenge to fizzle away because of the “fundamental” problem of inadequate forex supply which can be addressed when the country jacks up its oil output and attracts more foreign direct investments (FDIs).

On the controversy over the airlines trapped funds, he urged the CBN to have a second look at the airlines’ complaints.