On Monday, the Central Bank of Nigeria (CBN) announced that it had injected $500 million into the country’s forex to clear some of the backlogs.

Hakama Sidi Ali, Acting Director of Corporate Communications Department, CBN, stated that the new injection was to boost Nigeria’s liquidity and ensure seamless foreign exchange transactions.

The $500 million infusion came nearly a week after the apex bank cleared some of its external liabilities by distributing $2 billion across the manufacturing, aviation and petroleum sectors.

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However, the naira has continued to fall steadily, now trading at N1400 against a dollar. Meanwhile, the CBN stated that it still had a backlog of about $7 billion in forex to clear.

FIJ spoke with Mikael Bernard, a crypto and financial market analyst, who said that while the CBN’s $500 million is progress, it is no green light for the country’s economy.

“The CBN’s infusion of $500 million into the economy is being hyped, but nobody is talking about the current demand for the dollar or about the people who need the dollar today for their businesses. Everyone keeps forgetting that the $500 million is to clear some of the past demands,” he said.

“For the naira to truly appreciate, the CBN must also be able to meet present and future demands. What is the fate of the people who need the dollar for their businesses today? The infusion does not change or solve anyone’s problem. While it is the CBN’s job, they are not magicians.

“Anyone hoping they would suddenly make the naira appreciate is wasting his time. Several airlines have their money trapped with the CBN, some up to a billion dollars or even hundreds of millions.

“Nigerians who want to celebrate can do so, but the people who still have their forex with the CBN are not happy because a lot of money is being owed.”

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Bernard further said that the forex market’s liquidity will likely worsen as the Nigerian government has no incoming forex.

“What Nigeria is owing as a nation is higher compared to the forex backlog. There are other demands and debts yet to be cleared. These also include the national debt,” he said.

“It seems Nigeria has been running a Ponzi scheme on the rest of the world because even the Nigerian National Petroleum Corporation (NNPC), the nation’s wealth, is no longer remitting money to the federal government because all the crude reserves accrued to the government are being used to repay foreign loans.

“This means that there is no forex coming into the country, which further means that there is no forex available for people who want to make purchases today. This is why the dollar keeps rising, because there is no government or official way of getting it into the country.

“This is why the naira will continue to be underpriced and will crumble more.”

When FIJ asked what the CBN’s $2 billion disbursement to key sectors meant for our forex and economy, Bernard said the government was only repaying what it owed.

“The $2 billion given to the key sectors was for requests placed months or even years back. Many of these sectors do forward contracts. For instance, I could tell the CBN that I would need $1 million in one year and that I would pay for it now. I could even pay a premium depending on the situation of the price whenever I needed it.

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“For aviation, foreign airlines have sold tickets to Nigerians and want to pull out their money, but the CBN lacks the forex to enable them to do so and make payments abroad.

“Meanwhile, the $2 billion that was injected into forex is part of the Afreximbank loan secured by the federal government. FG pledged about 90,000 barrels of crude oil every day to access the loan.

“And this loan is mortgaging future revenue and makes Nigeria more hopeless as a country that can’t even address its present problems, not to mention future ones. If we do not clear up the present problems, we will only create more for the future.

“There is no magic or miracle in the economy; this whole arrangement will backfire. You will see that despite the injection, nothing changed.”

Also, when FIJ asked what could be done besides moving from importing to a production-based economy, he stated that dollarising the Nigerian economy or making the US dollar an alternative for transactions in the country might be the way out.

“The solution to the FX crisis might be to dollarise the country. This implies that we would stop using the naira but begin to use dollars for daily transactions and dissolve the CBN. It might be the only way out of the inflation,” he said.

“It seems most viable because the problem is no longer a currency issue but an economic crisis as well. It is now a national problem. The country is not making revenue and does not have a plan to do so.

“How are we going to get money to solve the currency and liquidity problems first? It is not a one-off thing or clearing backlogs. Backlogs are in the past. What about the people who need the money today and those who will need it tomorrow? Until there is constant liquidity, i.e., the constant ability of Nigerians to get FX, the problem cannot be solved.

“This is why dollarisation or any other currency we choose to adopt might be the best option for the economy right now, although it seems like a tough solution.

“Let everybody stop spending the naira or make the dollar an alternative medium for payments in the country.”