Nigerian Finance Minister Blames Naira Fall on Payment Arrears

by MMC
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Nigerian Finance Minister Adebayo Olawale Edun said up to $6.8 billion in overdue payments in the foreign exchange market needed to be cleared before the naira stabilized.

The currency of Africa’s largest economy extended its months-long slide and rushed towards the 1,000 per dollar mark in street trading on Thursday, as the central bank refrained from providing dollars to a panic-stricken market.

Edun, who was appointed to the role last month, said resolving overdue contracts would allow the naira to strengthen and “pave the way for additional foreign exchange flows.”

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“The problem we are facing now is that the market is not liquid enough,” Edun said in an interview in New York. “We are committed to encouraging liquidity based on the reforms that have currently been implemented, both fiscally and monetaryally. And with confidence restored, we believe foreign exchange flows will return.

Nigeria’s central bank on Thursday postponed a rate-setting meeting scheduled for September 25-26. Its new governor, former Citigroup executive Olayemi Cardoso, has not yet been confirmed in office, while the acting governor and four deputy governors have resigned, leaving a political vacuum at the top.

The central bank has remained mostly on the sidelines this month, according to market participants, with one saying it has barely supplied dollars to the official window. This helped accelerate the fall of the naira, pushing it down from around 900 to the dollar in early September.

The central bank’s dwindling supply of dollars is forcing buyers onto the streets to buy hard currency. Inflation in Africa’s largest economy is also at its highest level in more than 18 years, prompting economists to predict the central bank will raise interest rates again at its next meeting, which has so far been postponed to an unknown later date.

“The commitment is to maintain existing reforms and improve them. Further improve the foreign exchange market so that the gap narrows,” the Finance Minister said. “We are exploring all options to increase supply to reverse the one-way speculator gamble we are currently seeing.”

© 2023 Bloomberg

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