Nigeria’s currency, naira has been on a free fall in the last few weeks, reaching record lows against major foreign currencies like the dollar, and the pound. This development has resulted in fears among the country’s economic circles, with both experts and members of the public expressing deep concerns over the financial instability.
As previously reported on AfroWorldNews, the value of naira had been plummeting for a while now, but the situation escalated in recent weeks, resulting in a swift and dramatic plunge in the exchange rate. This publication gathered that this free-fall has left many Nigerians struggling to cope with economic uncertainty due to the volatility of the currency, the rising cost of living, and reduced purchasing power.
The genesis of naira battle…
The Central Bank of Nigeria, CBN has a backlog of accumulated foreign exchange, FX demand on the official market, forcing people and businesses to seek dollars at the parallel market. Dollar inflows to Nigeria have, however, decreased in recent years as a result of reduced investments and decreased crude oil exports, which account for more than 90% of Nigeria’s export earnings.
Investors applauded Tinubu’s lifting of currency regulations, thinking that a uniform exchange rate would make it simpler to obtain foreign cash, but this has yet to happen.
Nigeria’s FX Reserves situation
Foreign exchange forwards worth around $7 billion are past due in Nigeria, having been purchased by firms from local banks. When CBN failed to make payments, these banks used their own money to repay international credit lines. What this implies is that while the financial institutions are owed, corporations are unable to get new letters of credit.
Yemi Cardoso, the newly appointed CBN governor, had spoken on this situation, stating that reducing the backlog was a top priority but provided no time estimate.
Experts have expressed opinions that the forward agreements may be extended by 24 to 36 months, allowing the central bank additional time to locate the money to settle the corporate debt.
Nigeria’s foreign exchange reserves, according to CBN data, decreased from $37 billion in January to $33.5 billion in September.
Afro World News