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Wednesday, December 6, 2023

CBN Clears Matured FX Forwards With Banks to Stabilize Naira

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The Central Bank of Nigeria (CBN) cleared matured foreign-exchange (FX) forward contracts with an unspecified number of banks, according to spokesman Isa Abdulmumin.

This is a key step targeted by the government to help stabilize the naira.

The amount of overdue forward payments is estimated at about $6.7 billion, according to government officials.

Clearing that backlog has weighed on the naira, which fell to a record low of almost 1,000 per dollar on the official market this week.

The central bank took steps on Wednesday to clear the maturing contracts with the banks, Abdulmumin said. He wasn’t immediately able to comment on how much of the forward contracts had been cleared.

The scarcity of dollars in Nigeria has forced buyers looking for hard currency onto the streets of the nation’s cities, where the naira changed hands at 1,167 per dollar on Thursday.

Nigerian banks have placed significant foreign currency (FX) with the central bank in the form of derivative transactions (including swaps and forwards), and now there are indications that some of those outlays may violate the net open position (NOP) guidelines of the regulator.

The swaps positions are equivalent to $21 billion while there is a further $6.8 billion exposure in the form of FX forwards, banking sources tell MoneyCentral.

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