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Nigeria’s finance minister Adebayo Olawale Edun said up to $6.8 billion of overdue forward payments in the foreign exchange market need to be addressed before the naira stabilises.
The currency of Africa’s largest economy extended a months-long slide and hurtled toward the 1000-per-dollar mark in street trading on Thursday, as the central bank held back from supplying dollars to a panic-stricken market.
Edun, who was named to his role last month, said resolving the overdue contracts would allow the naira to strengthen and “pave the way for additional foreign exchange flows.
“The issue we have 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 reforms that have been made at the moment, on the fiscal side and the monetary side. And together with the restoration of trust and confidence we think the FX 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, is yet to be confirmed in his role, while the acting governor and four deputy governors have resigned, effectively leaving a policy-making vacuum at the top.
The central bank has mostly been on the sidelines this month, according to market players, with one person saying it has barely supplied dollars to the official window. That has helped accelerate the naira’s slide, pushing it down from around 900 per dollar at the start of September.
Shrinking dollar supply from the central bank is forcing buyers onto the streets for hard currency. Inflation in Africa’s biggest economy is also at the highest in more than 18 years, prompting economists to predict that the central bank would raise interest rates again at its next meeting, which for now has been deferred to an unknown future date.
“The commitment is to maintain the existing reforms and improving them. Improving the FX market further so the gap narrows,” the finance minister said. “Looking at all options for boosting supply so the one-way bet of speculators that we are seeing at the moment is reversed.”
