Folashodun Shonubi, the acting governor of the Central Bank of Nigeria (CBN), has claimed that the dollar backlog, the foreign exchange demand by investors and importers that has not been met, would be cleared in one or two weeks. The head of Nigeria’s apex bank made this claim while speaking to reporters in Lagos on Monday.
The unsettled foreign exchange backlog owed to local businesses has greatly reduced the confidence in CBN’s latest currency reform to float the naira and threatens to shut out foreign investors from the market.
Some estimates put the backlog at between $2 and $2.5 billion but JP Morgan reported that the total amount of forward contract debt owed by the CBN was almost $7bn. However, Mr Shonubi dismissed such claims as “misinformation.” “There is no outstanding $7bn as claimed by JP Morgan,” he said.
“The banks have been working with the central bank on various structures to clear the backlog. As a matter of fact, there’s a large amount of the obligations that the banks have already taken up so what happened was that at maturity they actually made the foreign exchange available for those who needed to use it, the importers. So we are discussing with them so we can structure their roles, so that’s very different.
“Then, there are some customers who still have their own obligations and part of the instruction of the banks in Nigeria is to also clear that backlog, something we’ve been discussing for a while and expect that we’ll clear it within the next one or two weeks.”
Folashodun Shonubi
CBN’s FX backlog and why it should be cleared quickly
The new administration under the leadership of President Tinubu understands the importance of fixing the foreign exchange market. Sonubi earlier said that Tinubu was worried about the consistent fall of the naira against the dollar. Hence efforts would be made to curb the situation. “Mr. President is very concerned about some of the goings on in the foreign exchange market,” he said.
A report has claimed that clearing the backlog is a major priority of Nigeria’s new administration but the pace of settling the backlog has been too slow for comfort, according to some investors who are worried that they would not be able to recoup the profits from their investments in the country.
Foreign investors have been waiting to see how quickly the dollar backlog is paid as it would go a long way to instil confidence that the new reforms proposed by the CBN are not just barks without bite.
CBN cracking down on BDCs
The Central Bank of Nigeria (CBN) announced additional guidelines for Bureau De Change (BDC) operators last month as it moves to reduce the dollar exchange rate and improve the efficiency of the Nigerian foreign exchange market.
The new operational mechanism states that BDC operators’ spread on buying and selling will be within an allowable limit of -2.5 per cent to +2.5 per cent of the Nigerian Foreign Exchange market window weighted average rate of the previous days.
In the circular, signed by O.S Nnaji, the Director of the Exchange Department, the CBN ordered a mandatory rendition by BDC operators of the statutory periodic reports (daily, weekly, monthly, quarterly and yearly) on the Financial Institution Form Rendition System (FIFX) which it said has been upgraded to meet individual operators requirements.
“For the last few weeks we’ve been investigating and there’s been quite a number of players out there that have been bringing in money and selling in less than official ways,” Shonubi said.
We are looking at those who do not follow through the normal system, send it through them, and sell it to Nigerian companies. They can expect to hear from us shortly. And they will not be the only ones.”
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