The naira has improve significantly against the dollar at the black market following the new foreign policy introduced by the Central Bank of Nigeria on Wednesday.
There was fear after the naira traded N520 to a dollar on Monday. However with the new policy in place, the naira gained tremendously as it exchanged N502 to a dollar on Wednesday night.
Traders also noted that the buy rate of the greenback improved below N490 to the dollar as currency hoarders who had held on to the dollar for several weeks rushed to sell off the currency following the renewed confidence in the CBN’s ability to meet forex demand.
Also, global ratings agency, Fitch Ratings said on Wednesday that the new forex policy announced by the CBN would ease forex scarcity and banks’ pressure.
According to the statement released by Fitch Ratings, the most important part of the CBN’s announcement was the normalisation of the interbank market.
The intention of the CBN to clear forex backlog of overdue foreign currency obligations owe by banks to international creditors, and the fact that the apex bank will no longer have a say on how banks on-lend the foreign currency they access from it, will strengthen banks and allow them to focus on what really matter.
The CBN had on Monday removed the preferential treatment for certain sectors of the economy, explaining that although providing forex for the manufacturing sector remain a priority, banks can now lend foreign currency they procure from it as they deem fit.
The apex bank also reaffirmed its intention to increase forex supplies at the interbank market and reduce banks’ waiting time for delivery of foreign currency to 60 days from 180 days via its forward sales contracts.
“This should help banks make more timely payments to creditors, speeding up the flow of currency to importers and helping the economy.
“The CBN’s initiatives are an important boost for banks as access to foreign currency liquidity is tight and banks have struggled to meet their foreign currency obligations.
“Nigeria is highly dependent on imports and Nigerian banks have long provided trade finance facilities to importers.
“Currency scarcity and exchange rate weakness have made it harder for importers reliant on naira-denominated cash flows to service US dollar-denominated trade finance lines, forcing some banks to restructure their obligations with international correspondent banks last year.
“Correspondent creditor banks agreed to maturity extensions and were duly compensated for this,” Fitch explained.