“Positive:” Analyst says CBN's FX Payment Will Improve Economy as Naira Nears N1k a Dollar
- The market reacted to the news of CBN paying banks their overdue forward on Thursday, 2nd November 2023
- This comes as Citi Bank, Stanbic IBTC, Standard Chartered Bank and others were recently settled by the apex bank
- There are indications that the direction of the naira could be toward N850 Per dollar earlier predicted by JP Morgan
Legit.ng journalist Zainab Iwayemi has over 3-year-experience covering the Economy, Technology, and Capital Market
Nigerians are finally breathing a sigh of relief after the CBN announced that it has cleared a significant amount of FX forwards in banks.
This appears to reflect in the FX market as of the close of Thursday, 2nd November 2023.
The naira rose to N1,120 per dollar in the unofficial market to represent a 4.27% appreciation from the amount it closed the previous day Wednesday, 1st November 2023 at N1,170 per dollar.
Source: Getty Images
Legit.ng had earlier reported that following the recent CBN move, the naira would bounce back to go below N1,000 as CBN begins FX solutions.
The minister of finance, Wale Edun, had reported that the overdue forward payment needed to stabilse the FX market is $6.7 billion.
According to a Punch report, Citi Bank, Stanbic IBTC, and Standard Chartered Bank have, however, been paid by the apex bank.
Sources confirmed the payment by the banks but did not disclose information about the specific amount paid to each of the banks.
Stanbic IBTC in a statement said,
“Yesterday, the apex bank began clearing the backlog of outstanding Retail SMIS obligations. The total amount cleared is yet to be ascertained.”
In a circular, titled “Settlement of Matured FX Forwards by CBN,” Citi Bank confirmed that the payment of all outstanding matured forward FX. it noted,
“It is a gradual payment that was done secretly, CBN didn’t make a fuss about it. It started yesterday and continued all through the night.”
Analyst hails move
Notably, JPMorgan Chase & Co earlier predicted that the naira to US dollar will close the year at N850 in the foreign exchange market. Analysts perceive the recent move as a step toward the direction.
Charles Abuede, a financial analyst, said the move aligns with the announcement made by the bank after the recent appointment of the new CBN chief by Nigeria's current president.
Based on available information, he said over 10 banks including Citibank, StanChart, Stanbic, UBA, Heritage, Keystone, Signature, Parallex, Greenwich Merchant, etc, and many more foreign investors and banks have been settled by the CBN with more counting.
He said,
“In my reaction to this development, I can start by saying this action taken by the apex bank is a positive development for the Nigerian economy, the foreign exchange market, the value of the naira, and the country's gross external reserves. However, it is not a short-term relief nor is it an intervention but an obligation by the CBN.
“In recent days, there has been a gradual increase in the gross external reserves position, which is a positive sign for dollar inflow and provides some relief for the naira. Additionally, It is anticipated that this move will lead to a more favorable interaction of the local currency in the foreign exchange market, aligning with the exchange rate movements between the naira and the U.S. dollar, where the Naira has been appreciating in various FX segments.”
“Furthermore, this step is expected to improve Nigeria's credit ratings from international rating agencies. In September, the Russel FTSE announced its intentions to downgrade Nigeria's index to 'unclassified' due to the rising FX backlogs and the challenges faced by Foreign Portfolio Investors (FPIs) in repatriating their incomes and dividends to their home countries, primarily caused by CBN's liquidity issues.
"Additionally, in the last week of October, MSCI also revealed plans to reclassify Nigeria's indexes from frontier to 'Standalone' status by February of 2024 due to the ongoing FX backlogs that remained unresolved.”
CBN May Phase Out Old 200, 500,1000 Naira Notes by December As Cash Scarcity Returns in Kano, Borno
Cash scarcity has reportedly returned in some parts of the country as the December 31, 2023, deadline for using the old N200, N500, and N1000 banknotes approaches, Legit.ng reported.
Some parts of the country are reportedly experiencing cash scarcity as the December 31, 2023, deadline for using the old N200, N500, and N1000 banknotes approaches.
Source: Legit.ng
