Nigeria to clear $1.8bn FX backlog in next few days

Nigeria is on the brink of clearing nearly $1.8 billion in foreign exchange (FX) backlog in the coming days, with reassurances from the Governor of the Central Bank of Nigeria, Olayemi Cardoso. The Governor also expressed optimism about the stabilization of the Naira in the near future. Victor Aluyi, the Head of Investment at Sankore Global Investment, shared insights on the outcomes of a recent meeting between the CBN and foreign portfolio investors. Discussing the recent developments, the focus was on achieving stability in the Naira. There have been discussions surrounding the gradual appreciation expected in the currency, fueled by recent FX reforms and adjustments in key parameters announced earlier in the week. The conversation shifted towards determining the fair value of the Naira and the strategies to uphold stability amidst existing FX pressures. Aluyi highlighted the vitality of ensuring a robust supply to maintain stability. While acknowledging the past depreciation of the Naira, he emphasized that with enhanced transparency in policy and recent reforms, improvements in the currency's value could be anticipated in the near to medium term. Moreover, the conversation delved into the trajectory of interest rates, pointing towards a potential upward bias. Aluyi expressed expectations of rates edging closer to the Monetary Policy Rate (MPR) of 22.75%. He mentioned ongoing and upcoming auctions signaling a probable rate increase, although the extent of the rise remained uncertain. Further discussions revolved around the implications of the Cash Reserve Ratio (CRR) adjustments on banks. While some banks might receive refunds under the new regime, others could face payment obligations. Aluyi stressed the need for gradual adjustments to mitigate shocks to the financial system, emphasizing that price stability is essential for businesses to not only survive but also thrive. In conclusion, the CBN's efforts to clear the FX backlog signify a significant step towards restoring economic stability in Nigeria. By addressing key issues such as Naira valuation, interest rate trajectory, and CRR adjustments, the country aims to pave the way for sustainable growth and prosperity in the financial landscape.