In a significant move, the Central Bank of Nigeria (CBN) has initiated tranche payments to 31 banks to clear the backlog of foreign exchange forward obligations swiftly. CBN Governor Yemi Cardoso announced this development at the bankers’ dinner in Lagos on Friday.
Cardoso outlined the positive impact of these payments on the FX market, stating, “We have already witnessed improvements in FX market liquidity in recent weeks as the market responded positively to tranche payments which have been made to 31 banks to clear the backlog of FX forward obligations.”
Emphasizing the meticulous approach, he added, “We have been subjecting these payments to detailed verification to ensure only valid transactions are honoured. In a properly functioning market, it is reasonable to expect significant FX liquidity, with daily trade potentially exceeding $1.0 billion.”
Addressing the challenges faced by the Nigerian economy, Cardoso expressed optimism, stating, “We envision that, with discipline and focused commitment, foreign exchange reserves can be rebuilt to comparable levels with similar economies.”
President Bola Tinubu’s recent commitment to settling the almost $7 billion in outstanding foreign exchange obligations owed to banks was also highlighted. Tinubu, speaking at the 29th Nigerian Economic Summit in Abuja, acknowledged the difficulties faced by the corporate sector in financial markets and pledged additional foreign exchange liquidity.
There have been notable strides in clearing foreign exchange debts with banks like Citibank, Stanbic IBTC, and Standard Chartered, indicating progress in addressing the FX backlog. This development is expected to restore investor trust in the Nigerian economy.
Despite the CBN’s persistent efforts, challenges persisted in the efficient disbursement of FX. Foreign airlines revealed that about 90% of their $783 million trapped funds were yet to be paid. Additionally, the Economist Intelligence Unit (EIU) expressed scepticism about the success of a currency float over 2024-28, citing concerns about the CBN’s ability to supply the market adequately and clear a backlog of foreign exchange orders valued at over US$6 billion.
However, Governor Cardoso reassured that the payment of obligations will continue until the FX backlog is completely cleared, demonstrating the CBN’s commitment to resolving the foreign exchange challenges faced by Nigeria.
