President Tinubu Promises To Honour Nigeria’s Foreign Exchange Obligations
Monday October 23, 2023
President Bola Tinubu has promised to honour all the foreign exchange obligations that Nigeria has entered into through forward contracts.
Forward contracts are financial agreements where two parties agree to exchange a specified amount of one currency for another currency at a predetermined future date and exchange rate.
The Central Bank of Nigeria (CBN) initiated agreements with Nigerian businesses to sell forward contracts, which essentially promised the businesses a fixed amount of dollars at a predetermined price in the future. These contracts allowed the businesses to open Letters of Credit (LCs), which are a form of payment guarantee issued by banks on behalf of the importers.