To rescue airlines, manufacturers and agricultural companies from foreign exchange scarcity, the Central Bank of Nigeria (CBN) has decided to intervene in the forex market to clear a backlog of demand.
In an operating document obtained by TheCable, the CBN said it would be intervening in the market through the Special Secondary Market Intervention Sales (SMIS).
“In order to further engender market confidence, ensure access to FX by end users and sustain the integrity of the Nigerian Inter-bank FX market, the Central Bank of Nigeria (CBN) has resolved to intervene in the Inter-bank FX market through forward settlement,” the document read.
The bank stated that “this is an important one-off exercise dedicated to the clearance of the backlog of matured FX obligations for: 1. Raw materials and machineries for manufacturing companies; 2. Agricultural chemicals; and 3. Airlines”.
The CBN also added that it would bypass its own directives, as stated in the forex market guidelines.
“Due to the peculiarity of this exercise, the CBN will not apply the relevant provisions under clause 2.4.3 (i) of its Revised Guidelines for the Operation of the Nigerian Inter-bank Foreign Exchange Market (hereinafter referred to as the Guidelines), which provides that “all SMIS bids shall be submitted to the CBN through the FXPDs.
“Consequently, CBN shall receive bids from all the Authorised Dealers.”
The apex bank did not state how much it was willing to sell to clear the backlog in the forex market, but made it clear that all payments would be made in forwards settlement.
Manufacturers and airlines have continued complaining that it had not been getting as much forex as needed for smooth operations.