CBN Aims to Resolve $10 Billion FX Backlog in a Two-Week Timeframe

Recently, the CBN announced that it was working alongside commercial banks in Nigeria to clear the $10 billion foreign exchange backlog within the space of 2 weeks.

This announcement was made on Tuesday by the acting CBN Governor, Folashodun Shonubi in a forum where he talked about the issues affecting the foreign exchange market.

He further stated that the backlogs will be addressed in different sections of the forex market. He also added that commercial banks control 75% of the forex transactions, and would work with the CBN to make sure that the backlog is cleared.

Folashodun Shonubi said,

• As a matter of fact, there are numerous obligations that the banks in Nigeria have already taken on. At maturity, they actually made the financing available for those who needed it, the importers. We are discussing, so we can structure their role so that’s very different.

• Then there are some customers who still have their obligations and are part of the restructuring of the banks in Nigeria. To also clarify, the backlog is something we have been discussing for a while, and we expect that we will clear it in the next one or two weeks.

• Today we still intervene in the market, so it’s not as if it has affected our ability to make monies available to banks in the Nigerian foreign exchange market (NAFEX) but when you look at the volumes, I think again we overemphasise what the role and depth of the CBN intervention is.

• There’s so much more foreign exchange that people don’t talk about, that has been made available through the banking system that banks are selling to their customers. It doesn’t come to the central bank; it doesn’t appear as part of the demand that comes to us, and it is significant. It is almost three times what we, as a Central bank, make available. So, the summary is that we hope to clear the backlog. Maybe in the next two weeks, through the different structures that are there.

The Forex backlog, or unmet demand for forex by exporters and investors, has reached $10 billion, and this has affected many companies, leading to major losses.

The backlogs include all dollar requests by manufacturers and importers buying raw materials overseas, payments of school fees overseas, payments of medical bills overseas, and travellers sourcing Business Travel Allowances (BTAs) and Personal Travel Allowances (PTAs).

For years, these requests have been slow due to the scarcity of dollars, a decline in foreign direct investment (FDI), and foreign portfolio investment (FPI) inflows.