Assurance Given at Nigeria Economic Summit Amid Naira’s Parallel Market Struggles
In response to the ongoing challenges faced by the naira in the parallel market, President Bola Tinubu has committed to clearing the backlog of foreign exchange contracts, a move aimed at restoring investor confidence. President Tinubu made these assurances during his address at the Nigeria Economic Summit #NES29 in Abuja on Monday.
Emphasizing the government’s commitment, President Tinubu stated, “All foreign exchange future contracts will be honored by this government. I assure you we have a line of sight to the foreign exchange we need to refloat this economy. And we will get it.”
The Central Bank of Nigeria (CBN) had previously sold forward contracts to numerous Nigerian businesses, promising dollars at agreed-upon prices in the future. Banks utilized Letters of Credit (LCs) based on these contracts to purchase goods from foreign suppliers. However, since February 2023, the CBN has not settled these contracts, resulting in a backlog of approximately $3 billion, according to insider sources. The broader backlog, which includes unsettled foreign investors’ contracts, is estimated to be around $10 billion.
The failure to clear the dollar backlog has left the CBN in a precarious position regarding foreign exchange liquidity, leading to the suspension of various transactions, including school fees and applications for Personal Travel Allowance. President Tinubu’s commitment to addressing these issues signals a proactive stance by the government to stabilize the foreign exchange market and foster economic recovery.
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