CEM REPORT, FINANCE | The Central Bank of Nigeria (CBN) has announced that it has cleared the backlog of pending foreign exchange (forex) obligations to foreign airlines operating in the country. The CBN said it has disbursed approximately $61.64 million to the airlines through various banks, in fulfilment of its commitment to eliminate the forex scarcity in the Deposit Money Banks (DMBs).
“This initiative is part of the CBN’s efforts to decrease its remaining liability to the airlines and ensure a smooth and uninterrupted operation of the aviation sector,” a statement signed by Hakama Sidi Ali, acting director, corporate communications department said.
Sidi Ali further disclosed that, in the past three months, the CBN has also redeemed outstanding forward liabilities amounting to almost $2 billion, which underscores the Bank’s commitment to the resolution of pending obligations and a functional foreign exchange market.
According to her, these payments signify the CBN’s ongoing efforts to settle all remaining valid forward transactions, with the aim of alleviating the current pressure on the country’s exchange rate and stabilizing the Naira.
“It is anticipated that this initiative by the CBN should provide a considerable boost to the Naira against other major world currencies and further increase investor confidence in the Nigeria economy,” she said.
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The $61.64 million disbursement is just a drop in the bucket compared to the foreign airlines’ $800 million estimated to have been trapped in Nigeria. However, it comes on the heels of the CBN redeeming nearly $2 billion in outstanding forward liabilities over the past three months. This demonstrates the bank’s dedication to tackling the backlog and establishing a more efficient FX market.
Impact of CBN’s Action
Analysts predict that this proactive stance by the CBN could have a significant impact on the Naira. Increased FX availability for airlines is likely to ease pressure on the currency, potentially leading to a stronger Naira against major world currencies. This, in turn, could attract further foreign investment and bolster economic activity.
