Forex

Central Bank of Nigeria’s Unsettled FX Backlog Threatens Investor Confidence and Currency Reform

The suspicion is that Nigeria’s external reserves are much less than what the CBN reports. The level of opacity is alarming and is a real drag on investor confidence

Published

10 months ago

July 6, 2023

Investors King

The Central Bank of Nigeria (CBN) is facing a significant challenge with its unsettled foreign exchange (FX) backlog owed to local businesses, which is now having detrimental effects on investor confidence and the success of its latest currency reform measures.

The apex bank previously sold approximately $200 million in FX forward contracts every two weeks. However, as dollar inflows dried up and the demand for dollars surged, the backlog grew exponentially.

The growing concern over the backlog extends beyond Nigerian businesses, including manufacturers and importers who have been waiting in lengthy queues for dollars.

The situation is also eroding foreign investor confidence in the CBN’s recent decision to float the naira as foreign investors, whose involvement in the FX market can significantly impact the success of the CBN’s reform efforts, are perplexed as to why the central bank is unable to utilize its $34 billion external reserves to settle the outstanding contracts.

Estimates suggest that the backlog ranges between $2 billion and $2.5 billion, representing less than 10 percent of the country’s external reserves. Sources familiar with the situation have revealed that the six-month backlog of forward contracts is severely undermining investor confidence, stating, “Our CBN is the only central bank in the world that defaults on obligations to investors.”

Currency forwards, which are binding contracts in the foreign exchange market, allow for the locking in of exchange rates for future currency transactions. These instruments serve as essential hedging tools, providing stability in uncertain currency markets.

Market insiders have disclosed that clearing the backlog is a top priority for Nigeria’s new administration. However, the pace of resolution has been disappointingly slow for many investors.

This has raised suspicions among some fund managers, with one based in South Africa, who preferred to remain anonymous, stating, “The suspicion is that Nigeria’s external reserves are much less than what the CBN reports. The level of opacity is alarming and is a real drag on investor confidence.”

Nigeria’s external reserves are expected to provide a minimum of seven months’ worth of import cover. Yet, despite having more substantial reserves than other central banks that fulfill their obligations, the CBN continues to default on dollar payments.

The persistence of non-settlement of forward contracts by the CBN is setting a detrimental precedent, according to a senior business leader who has been in the queue for dollars since last year.

They commented, “It used to be inconceivable that the CBN would default on its obligations to the market for protracted periods, but it has become the norm.”

President Bola Tinubu has pledged to thoroughly revamp the monetary policy, leading to the suspension of CBN governor Godwin Emefiele and the implementation of currency floating within just one month. Foreign investors are closely observing how the CBN handles the dollar backlog, as it casts a shadow of doubt over the reforms championed by the new government.

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Naira

Dollar to Naira Black Market Exchange Rate Today 4th May 2024

The black market, also known as the parallel market or Aboki fx, US dollar to Nigerian Naira exchange rate as of May 4th, 2024 stood at 1 USD to ₦1,400.

Published

22 hours ago

May 4, 2024

Samed Olukoya

The black market, also known as the parallel market or Aboki fx, US dollar to Nigerian Naira exchange rate as of May 4th, 2024 stood at 1 USD to ₦1,400.

Recent data from Bureau De Change (BDC) reveals that buyers in the Lagos Parallel Market purchased a dollar for ₦1,380 and sold it at ₦1,370 on Friday, May 3rd, 2024.

This indicates a decline in the Naira exchange rate compared to the current rate.

The black market rate plays a crucial role for investors and participants, offering a real-time reflection of currency dynamics outside official or regulated exchange channels.

Monitoring these rates provides insights into the immediate value of the Naira against the dollar, guiding decision-making processes for individuals and businesses alike.

It’s important to note that while the black market offers valuable insights, the Central Bank of Nigeria (CBN) does not officially recognize its existence.

The CBN advises individuals engaging in forex transactions to utilize official banking channels, emphasizing the importance of compliance with regulatory frameworks.

How much is dollar to naira today in black market

For those navigating the currency exchange landscape, here are the latest figures for the black market exchange rate:

Buying Rate: ₦1,400
Selling Rate: ₦1,390

As economic conditions continue to evolve, staying informed about currency exchange rates empowers individuals to make informed financial decisions. While the black market provides immediate insights, adherence to regulatory guidelines ensures stability and transparency in forex transactions.

Naira

Black Market Dollar Rate Reaches ₦1,380 Today, May 3rd, 2024

US dollar to Nigerian Naira exchange rate as of May 3rd, 2024 at the black market stood at 1 USD to ₦1,380

Published

2 days ago

May 3, 2024

Samed Olukoya

The black market, also known as the parallel market or Aboki fx, US dollar to Nigerian Naira exchange rate as of May 3rd, 2024 stood at 1 USD to ₦1,380.

Recent data from Bureau De Change (BDC) reveals that buyers in the Lagos Parallel Market purchased a dollar for ₦1,350 and sold it at ₦1,340 on Thursday, May 2nd, 2024.

This indicates a decline in the Naira exchange rate compared to the current rate.

The black market rate plays a crucial role for investors and participants, offering a real-time reflection of currency dynamics outside official or regulated exchange channels.

Monitoring these rates provides insights into the immediate value of the Naira against the dollar, guiding decision-making processes for individuals and businesses alike.

It’s important to note that while the black market offers valuable insights, the Central Bank of Nigeria (CBN) does not officially recognize its existence.

The CBN advises individuals engaging in forex transactions to utilize official banking channels, emphasizing the importance of compliance with regulatory frameworks.

How much is dollar to naira today in black market

For those navigating the currency exchange landscape, here are the latest figures for the black market exchange rate:

Buying Rate: ₦1,380
Selling Rate: ₦1,370

Naira

Dollar to Naira Black Market Today, May 2nd, 2024

As of May 2nd, 2024, the exchange rate for the US dollar to the Nigerian Naira stands at 1 USD to 1,350 NGN in the black market, also referred to as the parallel market or Aboki fx.

Published

3 days ago

May 2, 2024

Samed Olukoya

As of May 2nd, 2024, the exchange rate for the US dollar to the Nigerian Naira stands at 1 USD to 1,350 NGN in the black market, also referred to as the parallel market or Aboki fx.

For those engaging in currency transactions in the Lagos Parallel Market (Black Market), buyers purchase a dollar for N1,310 and sell it at N1,300 on Monday, April 29th, 2024 based on information from Bureau De Change (BDC).

Meaning, the Naira exchange rate declined when compared to today’s rate below.

This black market rate signifies the value at which individuals can trade their dollars for Naira outside the official or regulated exchange channels.

Investors and participants closely monitor these parallel market rates for a more immediate reflection of currency dynamics.

How Much is Dollar to Naira Today in the Black Market?

Kindly be aware that the Central Bank of Nigeria (CBN) does not acknowledge the existence of the parallel market, commonly referred to as the black market.

The CBN has advised individuals seeking to participate in Forex transactions to utilize official banking channels.