CBN:Naira May Trade Below N1000/$ As CBN Begins Clearance Of FX Backlogs

CBN:Naira May Trade Below N1000/$ As CBN Begins Clearance Of FX Backlogs……CONTINUE READING>>>>>>

LAGOS – There are strong indica­tions that the Central Bank of Nigeria (CBN) has “cleared” forex back­logs of banks and airlines.

Investigation by Daily Inde­pendent revealed that banks are claiming backlogs are be­ing cleared while airlines are also seeing their backlogs being cleared by the CBN

This is confirming the Daily Independent story on Monday, titled, “Fresh CBN Forex Mar­ket Push Unsettles Speculators, Banks”, where it was confirmed that the apex bank will begin clearance of the backlog of forex this week.

The implication of this is that the naira’s outlook has improved along with a recent dovish state­ment from the U.S. Fed which el­evated positive perceptions in Ni­geria’s foreign exchange market.

In addition, Federal Reserve Chairman Jerome Powell’s re­marks following the two-day policy meeting caused the dollar to weaken versus most other cur­rencies from investors’ perspec­tive on the bias that Rate hikes by the world’s most powerful central bank might be over.

As expected, the Federal Open Market Committee left interest rates where they are: between 5.25% and 5.50%.

The Fed acknowledged the American economy’s surpris­ing resilience in the face of its aggressive tightening, which it initiated more than a year ago, and will not rule out another hike in the future.

Consequently, JPMorgan Chase and Co. anticipates that by year’s end, the Naira to US dollar exchange rate will even­tually strengthen towards N850 because of tighter regulations, more enticing rates, and favour­able FX levels, which will likely discourage further dollarization and draw in some foreign capital into Nigeria.

The Tier 1 American bank an­ticipates that the FG will contin­ue to be open to more exchange rate flexibility. “Although driving up the value of the naira relative to the US dollar is vital, he con­tinued, it becomes challenging due to “significant delays in un­met foreign exchange demand and low net foreign exchange reserves.“. It added

The most valuable bank in the world forecasts that the concur­rent push for tighter monetary conditions might likely reinforce recent efforts to reinstate a flex­ible exchange rate regime in Af­rica’s largest economy.

The difference between the parallel rate, which is current­ly a little over 1,000 naira, and the interbank exchange rate has shrunk in recent days, rising from 750 to over 900 naira against the dollar.

The federal government also intends to implement new reg­ulations in the forex market to strengthen the supply of the nai­ra and suppress illicit currency trading activities.

The new regulation will make sure that the “illicit” black mar­ket is denied supplies and will broaden the official market to include all lawful transactions.

“We think all of that will hap­pen before December, and maybe in a matter of a few weeks we will begin to see the results, so before the end of the calendar year, the naira should find its true value, not the one that is being done currently in the parallel market,” according to Mr. Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms.

Finally, Nigeria’s finance minister, Wale Edun, stated last month that the country antic­ipates receiving $10 billion in inflows in the upcoming weeks.

These inflows would help ease liquidity and clear the backlog of past-due forward contracts that are weighing on the naira.

Edun had also mentioned at the summit that President Bola Tinubu signed two executive orders last week with the same goal of stopping the flow of dol­lars into the parallel market from the official FX window.

The first would allow dol­lar-denominated instruments to be issued and sold to Nigerian citizens who own dollars, while the second would allow dollar-de­nominated bonds to be issued and sold to Nigerians living abroad as well as foreign investors. Edun states that the gazetting process for both executive orders is cur­rently underway.……CONTINUE READING>>>>>>

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