CBN Sells $1bn to Clear Backlog of Forex Demand

• CBN Sells $1bn to Clear Backlog of Forex Demand

The Central Bank of Nigeria has sold about $1bn on the forward market to clear a backlog of dollar obligations in selected sectors, according to foreign exchange traders.

The traders said on Thursday that the dollar sale was made last week. They described it as the largest special auction by the CBN since the naira peg was removed in June.

Outstanding dollar demand was about $4bn before June, when the 16-month-old peg was removed. Efforts to cut dollar demand have been largely unsuccessful due to low oil prices.

Crude sales account for about 90 percent of Nigeria’s foreign exchange earnings.

Traders said the CBN told banks to prioritise airlines, manufacturing firms, petroleum products importers and agriculture sectors, the sectors worst hit by the dollar shortage, in the auction.

“The central bank sold $1bn at last week’s special forex auction and directed banks to issue fresh letters of credit to reflect the amount sold in favour of the affected sectors,” a senior currency trader told Reuters.

Traders said the CBN sold 30-day and 60-day forwards at the auction.

On December 19, the CBN instructed commercial lenders to submit their backlog of dollar demand from fuel importers, airlines, raw materials and machinery for manufacturing firms and agricultural chemicals for the special forex intervention.