In a significant move to address the liquidity crunch in Nigeria’s foreign exchange market, the Central Bank of Nigeria (CBN) has granted permission to International Oil Companies (IOCs) to resume the sale of US dollars to banks.
This decision aims to inject liquidity into the Investors & Exporters (I&E) foreign exchange market, according to a reliable source familiar with the matter.
The lifting of the restriction on IOCs selling dollars to dealing member banks is expected to alleviate the existing backlog of US dollar demand and provide a boost to the Investors & Exporters window.
The move signifies a departure from the policies of the previous governor, Godwin Emefiele, as the CBN’s acting governor, Folashodun Shonubi, works to implement reforms and deliver on President Bola Tinubu’s mandate for monetary policy house cleaning.
Previously, Nigeria’s currency, the naira, was subjected to a hard currency peg, draining dollars from the economy and unsettling investors.
However, the CBN’s decision to float the naira ended the peg and initiated reforms that aimed to increase the supply of dollars. The value of the naira plummeted by over 60 percent in response to this long-overdue reform.
In a positive sign, the naira experienced a 1.2 percent gain at the I&E window following the recent developments. The foreign exchange turnover also witnessed a notable increase of 20 percent, reaching $89.37 million compared to the $73.86 million worth of trades recorded on the previous trading day.
The CBN’s focus on bolstering dollar supply is crucial in alleviating the pressure on the naira and stabilizing the foreign exchange market. By allowing IOCs to resume the sale of US dollars to banks, the central bank aims to facilitate smoother transactions and provide businesses and individuals with greater access to foreign currency.
This recent policy shift reflects the determination of Nigeria’s new leadership to prioritize economic stability and address the challenges facing the foreign exchange market.
While the road to complete recovery may be long, these developments signify a step in the right direction, bringing hope for a more balanced and thriving economy.