Nigeria's Central Bank unification of exchange rates in June 2023 triggered the naira's devaluation from 460 to over 1,500 per dollar within six months. The immediate consequence was acute dollar scarcity as import demand surged and FX supply tightened. Commercial banks could not open Letters of Credit for importers because CBN allocations were insufficient to fund all outstanding import obligations. An estimated $4 billion in LC backlogs accumulated at Nigerian commercial banks in Q3 2023.
Policy Response
The CBN introduced special FX windows for manufacturers, food importers, and pharmaceutical companies to prioritise access to dollars for essential imports. The Nigerian government also approached the World Bank for a $2.25 billion development policy loan partly to replenish FX reserves and clear the LC backlog. The naira stabilised around 1,500-1,600 per dollar through early 2024 as portfolio inflows and improved oil revenues increased supply. Importers and exporters managing Nigeria FX exposure can access trade finance guidance and bank contacts on intra-africa.com.
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