Naira Gains, Dollar Crashes in All Markets as CBN Speaks on Settling FX Obligation
- Over the last two days, the value of the naira has increased on all foreign currency markets
- This follows the CBN’s announcement that it will soon begin to settle the $7 billion in outstanding FX commitments
- According to CBN the forensic verification procedure for the foreign exchange backlog is nearly complete
Legit.ng journalist Zainab Iwayemi has 5-year-experience covering the Economy, Technology, and Capital Market.
Since the Central Bank of Nigeria introduced the FX code on the Nigerian Foreign Exchange Market (NFEM), the naira has appreciated on all foreign exchange (FX) markets in the past two days.
Source: Getty Images
This comes after the Central Bank of Nigeria (CBN) promised to start full settlements of the $7 billion backlog of foreign exchange obligations shortly.
At the official close of the foreign currency market, the naira's value strengthened even more, closing Thursday at N1500.78 to the US dollar.
By the end of Monday's trading session, the value of the naira had dropped to N1,534.54 from its starting point of N1,533.26 to the dollar. Following the release of the Nigeria Foreign Exchange Code, the value of the naira started to rise by the end of Tuesday.
On Wednesday, it increased even more to N1,508.39 to the dollar, and on Thursday, it closed at N1,500.78. On Thursday, the naira closed at N1,635 to the dollar, reversing some of its gains at the parallel market.
On the parallel market, the naira started the week's trading activities at N1,660 to the dollar. On Monday and Tuesday, it rose to N1,650 and N1,640 to the dollar, respectively. The value of the currency increased to N1,630 to the dollar at the end of business on Wednesday.
The CBN governor, Olayemi Cardoso, revealed at the Nigeria Foreign Exchange Code introduction on Tuesday that the forensic verification process for the foreign exchange backlog is almost over and that final settlements will be handled appropriately.
He also noted that a period of unethical market activities and systemic abuse is coming to an end as a result of the foreign currency reforms, including the FX Code.
“We must not forget where we are coming from. The era of multiple exchange rates, which created privileges for a select few at the expense of most Nigerians, severely undermined market integrity.
“As an example, the $7 billion of forex backlogs that has taken over 12 months to verify has led to the discovery of multiple unethical and even illegal practices that we should not be proud of as a nation.
“The forensic verification process is now near complete, and final settlements will be processed accordingly. Similarly, the period of unprecedented ways-and-means-financing inflicted significant damage on our economy, contributing to inflation, currency depreciation, and eroded public confidence.
“These practices must never return. The FX Code is a firm rejection of such distortions and an equally firm commitment to a future defined by fairness, trust and market-driven principles.
CBN gives deadline for banks
Legit.ng reported that participants in the foreign exchange market have been instructed by the Central Bank of Nigeria to submit compliance reports by January 31, 2025, detailing their adherence to the Nigeria FX Code.
The directive is a component of initiatives to improve market transparency, governance, and moral behaviour.
With its implementation on December 2, 2024, the Nigeria FX Code lays out best practices to guarantee a strong, equitable, and open foreign exchange market.
Proofreading by Nkem Ikeke, journalist and copy editor at Legit.ng.
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Source: Legit.ng
