Recent reforms by the Central Bank of Nigeria (CBN) have led to a surge in liquidity within the Nigerian foreign exchange market, prompting Nigerian companies to settle their overdue dollar obligations.
Major firms such as MTN Nigeria Communications Plc, BUA Foods Plc, and Cadbury Schweppes Overseas Limited’s Nigerian arm have confirmed their ability to procure dollars for fulfilling foreign currency obligations, marking a significant departure from previous challenges stemming from US dollar scarcity.
Dollar liquidity increased by 90% to $160.8 million on Tuesday compared to the previous day, as reported by Chapel Hill Denham. The CBN is also selling dollars to money traders to enhance distribution to retail users.
Despite the increased liquidity, the naira depreciated by 1.2% to 1,416 against the dollar on Tuesday.
MTN Nigeria, the country’s largest mobile operator, has capitalized on the improved liquidity. Chief Financial Officer Modupe Kadiri revealed a significant reduction in the company’s letters of credit obligations, down by 41.6% to $243.4 million.
Similarly, BUA Foods, Nigeria’s largest food and beverage company, reduced its debts by approximately 6% in the first quarter of the year, with Managing Director Ayodele Abioye expressing optimism about future performance.
Cadbury Nigeria has also accessed all its dollar needs from the official market since the start of the year, according to Finance Director Ogaga Ologe, enabling the company to manage its local currency cash effectively.
Economist and chief executive at Lagos-based CFG Advisory, Adetilewa Adebajo, noted that increased dollar liquidity is providing companies with the opportunity to pay down debts and mitigate the effects of currency devaluation.
However, he emphasized the need for sustained liquidity over the next year to support business turnaround efforts.
Experts say the average daily FX turnover has more than doubled from 2023 lows, indicating growing confidence in the Nigerian economy.
