Forex

Nigerian Companies Settle Dollar Debts as Central Bank Reforms Bolster Forex Liquidity

Published

2 weeks ago

May 8, 2024

In a significant development for Nigeria’s corporate landscape, several major companies have begun to settle their long-standing dollar debts following the Central Bank of Nigeria’s (CBN) recent reforms that bolstered dollar supply.

The reforms have provided much-needed relief to businesses grappling with forex scarcity and overdue obligations.

Among the notable firms taking advantage of the improved forex liquidity are MTN Nigeria Communications Plc, BUA Foods Plc, and Cadbury Schweppes Overseas Ltd.’s Nigeria unit.

These companies, some of the largest players in Africa’s most populous nation, have reported that they are now able to access dollars to meet their foreign currency obligations, marking a stark reversal from previous struggles with forex shortages.

MTN Nigeria, the country’s leading mobile operator, disclosed that it utilized the enhanced liquidity in the forex market to significantly reduce its letters of credit obligations by 41.6%, slashing it down to $243.4 million from $416.6 million in December.

Chief Financial Officer Modupe Kadiri emphasized this move as a strategic measure to mitigate losses during an investor conference call last week.

The Central Bank of Nigeria’s reform measures, implemented since the beginning of the year, have been instrumental in driving this positive change. These measures include raising the benchmark interest rate by 600 basis points to attract capital inflows and abandoning the currency’s peg, allowing the market to determine the exchange rate of the naira.

After years of unconventional currency management that deterred investors and exacerbated forex scarcity, these reforms have injected new life into Nigeria’s forex market.

According to Tatonga Rusike, a sub-Saharan Africa economist at Bank of America Corp., portfolio flows have responded positively to the reforms, leading to a substantial increase in average daily forex turnover, which has more than doubled from 2023 lows.

Recent data from Chapel Hill Denham indicates a remarkable surge in dollar liquidity, with a 90% jump to $160.8 million on Tuesday compared to the previous day.

Also, the central bank’s proactive approach, including selling dollars to money traders to enhance distribution to retail users, has further contributed to the improved forex liquidity environment.

The positive impact of increased dollar liquidity is evident across various sectors of the Nigerian economy.

BUA Foods, the country’s largest food and beverage company, reported a 6% reduction in debts during the first quarter of this year, attributed to improved dollar availability.

Similarly, Cadbury Nigeria has been able to fulfill all its dollar requirements from the official market since the beginning of the year, leading to a drop in local-currency cash reserves.

Economists and industry experts view the enhanced forex liquidity as a welcome development that provides companies with a much-needed reprieve to settle debts and navigate the effects of currency devaluation.

Adetilewa Adebajo, economist and chief executive at Lagos-based CFG Advisory, emphasized the importance of sustaining liquidity to support the turnaround desired by companies.

He stressed the need for positive real rates, matching interest rates with inflation, and fiscal responsibility to ensure continued economic stability and growth.

As Nigerian companies take advantage of improved forex liquidity to address long-standing financial challenges, the success of the central bank’s reforms will be closely monitored, with hopes for sustained liquidity and economic recovery in the months ahead.

Up Next

Zimbabwe Implements Strict Rules: $14,782 Fine for Violating Official Exchange Rate

Don't Miss

Yen’s Plunge Persists Despite Japan’s Late New York Trading Intervention

Samed Olukoya

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

Comments

Naira

Black Market Dollar to Naira Exchange Rate Today 17th May 2024

The black market, also known as the parallel market or Aboki fx, US dollar to Nigerian Naira exchange rate as of May 17th, 2024 stood at 1 USD to ₦1,540.

Published

2 days ago

May 17, 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 17th, 2024 stood at 1 USD to ₦1,540.

Recent data from Bureau De Change (BDC) reveals that buyers in the Lagos Parallel Market purchased a dollar for ₦1,560 and sold it at ₦1,550 on Thursday, May 16th, 2024.

This indicates a slight improvement in the Naira exchange rate when compared to today’s 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 the black market

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

Buying Rate: ₦1,540
Selling Rate: ₦1,530

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.

Forex

SEC and ABCON Explore Collaboration for ‘Kolectyomoni’ Digital Currency Platform

Published

2 days ago

May 17, 2024

Samed Olukoya

The Association of Bureaux De Change Operators of Nigeria (ABCON) has initiated talks with the Securities and Exchange Commission (SEC) to explore collaboration on its upcoming digital currency market platform, ‘Kolectyomoni’.

This move was underscored during an official visit by ABCON representatives to the newly appointed Director General of the SEC, Dr. Timi Agama. Aminu Gwadabe, President of ABCON, conveyed the association’s eagerness to engage with SEC to ensure the smooth operation of its digital currency platform.

Gwadabe emphasized that ABCON recognizes the regulatory oversight of SEC in the financial sector and seeks its guidance to navigate the complexities of the digital currency market.

He pointed out that while digital currencies hold immense potential for financial inclusion and innovation, they also present regulatory challenges that require collaborative efforts between industry stakeholders and regulatory bodies.

Highlighting the significance of embracing digital currencies, Gwadabe noted, “The future of BDC’s business is digital currency.”

He stressed the growing adoption of digital currencies among Nigerians, citing statistics that reveal a rising number of participants in the digital currency ecosystem, with a substantial market size of $9 billion annually.

In response, Dr. Timi Agama expressed SEC’s openness to support and facilitate the growth of the digital currency sector in Nigeria.

He acknowledged ABCON’s initiative in launching the ‘Kolectyomoni’ platform and assured of SEC’s cooperation in providing regulatory guidance and oversight.

Agama reaffirmed SEC’s commitment to fostering innovation in the financial sector while ensuring investor protection and market integrity.

He underscored the importance of collaboration between regulators and industry players to develop robust frameworks that foster innovation and safeguard against potential risks.

Furthermore, Agama encouraged ABCON to finalize the development of the ‘Kolectyomoni’ digital currency platform and submit it to the SEC for thorough review and assessment by the technical team.

He emphasized the need for timely regulatory oversight to address emerging trends in the digital currency market and maintain regulatory compliance.

Naira

Black Market Dollar to Naira Exchange Rate Today 16th May 2024

The black market, also known as the parallel market or Aboki fx, US dollar to Nigerian Naira exchange rate as of May 16th, 2024 stood at 1 USD to ₦1,560.

Published

3 days ago

May 16, 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 16th, 2024 stood at 1 USD to ₦1,560.

Recent data from Bureau De Change (BDC) reveals that buyers in the Lagos Parallel Market purchased a dollar for ₦1,530 and sold it at ₦1,520 on Wednesday, May 15th, 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.