Can Nigeria clear FX backlog?

The Central Bank of Nigeria is facing challenges in clearing the foreign exchange backlogs, as promised earlier this month. Paul Alaje, a Senior Economist at SPM Professionals, shed light on the strategies needed to prop up the value of the naira amidst the task ahead for the new CBN governor. Alaje highlighted the need to address the supply side problems in the short and medium term to attract investors and restore confidence in Nigeria's foreign reserves. However, he expressed concerns about conflicting reports on the reserves and the impact on investor confidence. Alaje emphasized the importance of the Senate confirming the new CBN governor and implementing effective policies to stimulate economic recovery. He mentioned that while the devaluation of the naira aimed to attract foreign investors, structural issues and lack of confidence hindered their participation. The uncertainty surrounding the naira's value and the upcoming budget presentation added to the economic challenges facing Nigeria. Alaje suggested that a combination of monetary and fiscal policies could lead to economic relief by Q4 2024. Regarding the postponement of the MPC meeting, Alaje indicated that market uncertainty persisted, calling for swift action to address the volatility in the foreign exchange market. He underscored the need for clarity on the new governor's policy direction and its impact on key rates such as CRR and monetary policy rates. The market awaited the Senate's confirmation of the new governor to provide guidance on Nigeria's economic future and business environment. In conclusion, Alaje expressed hope that the new CBN governor, once confirmed, would instill confidence in Nigeria's business environment and attract international investors. The road to economic recovery may be challenging, but a cohesive approach between the monetary and fiscal authorities could pave the way for a more stable and thriving economy in the years to come.