Nigeria reels from sustained FX illiquidity, with repatriation-related demand largely undermined by unorthodox policy measures. This multi-year FX impasse has resulted in notable responses from Deposit Money Banks (DMBs) and the Central Bank of Nigeria (CBN) in recent months. In particular, DMBs have moved to adopt some or all of the following measures: 1) temporary suspension of international ATM withdrawals and POS payments and 2) the downward review of spending limits on cross-border payments (See figure 1). In our view, these reactions may have been linked to a likely reduction in CBN dollar supply, despite the apex bank's earlier reassurances of its determination to meet genuine dollar demand (through the banks) after the halt of sales to BDCs in July 2021.

That said, the CBN's introduction of the RT200 FX Programme, aimed at realising $200 billion over the next 3-5 years (average of $40.0 billion per year), offers some hope of a stronger regulatory drive to arrest the crisis over the medium term. The programme acknowledges the need to diversify Nigeria's export earnings from a strong reliance on hydrocarbon-related inflows (see Figures 2). The scheme is expected to incentivise the private sector and is anchored on the following five (5) pillars.