Over two weeks after the Central Bank of Nigeria (CBN) pledged to settle over $10 billion in foreign exchange debts owed to Deposit Money Banks (DMBs), investigations by The PUNCH, followed by GOVIMA, revealed that the CBN has yet to fulfil its promise.
During this period, the Nigerian naira continued to struggle, with Bureau De Change (BDC) operators selling it for rates ranging between 990/$ and 995/$ in Lagos, Abuja, and Kano.
However, on the Investor & Exporter forex window, the naira did experience a slight uptick, appreciating to 747.76/$ on Friday from 772.98/$ on Thursday.
The former acting CBN Governor, Folashodun Shonubi, announced on September 6, 2023, that the CBN had concluded negotiations on dollar debts with commercial banks. He assured that all forex exchange backlogs would be cleared within one to two weeks.
Despite this assurance, multiple high-ranking bank executives have informed The PUNCH that almost three weeks later, the CBN has not fulfilled its promise. This situation has placed banks in a precarious position regarding FX liquidity, prompting many to temporarily suspend various FX transactions, including school fees and Personal Travel Allowance applications.
The delay in clearing the forex backlogs has also exacerbated the scarcity of dollars in the parallel market as bank customers turned to the black market to meet their forex needs.
JPMorgan, a US-based lender, estimated the total amount of forward contract debt owed by the CBN at $6.84 billion, though the CBN has disputed this figure. Other reports suggested forward contracts and dollar swap deals between the apex bank and commercial banks amounted to over $10 billion.
The CBN has not provided immediate comments on this matter as of Sunday.
In the parallel market, the Pound Sterling was exchanged at rates of £1,235/ and £1,250/, while the Euro traded at rates of 1,025/€ and 1,028/€, as reported by market operators.
Economists and industry experts fear that the continued depreciation of the naira could lead to further increases in the cost of goods and services, potentially forcing more businesses to shut down. They have called for urgent interventions to mitigate the impact of these challenges on Nigerians.
The President of the Nigerian Association of Small-Scale Industrialists, Segun Kuti-George, emphasised that the rising cost of production due to increased input costs, especially for imported materials and equipment, could lead to higher product prices. This, in turn, might result in consumers favouring cheaper imported goods over domestically produced ones.
Francis Meshioye, President of the Manufacturers Association of Nigeria, also warned that the current exchange rate could lead to price hikes for products as manufacturers struggle to access foreign exchange for their operations.
Dr. Aminu Gwadabe, President of the Association of Bureaux De Change Operators of Nigeria, emphasised that the volatility of the local currency had contributed to Nigeria’s slow economic growth, pointing out that challenges like investor backlog and reduced Diaspora remittances were further impeding liquidity in the market.
As Nigeria faces these economic challenges, Dr. Olayemi Cardoso, the newly appointed CBN Governor, assumes leadership at a critical juncture in the nation’s economic history. Experts call for strategic and transparent interventions in the forex market to stabilize the naira and clear forex backlogs to restore investor and public confidence.
Additionally, they suggest creating an autonomous forex window within the banking system to enable the currency to trade freely and deter the diversion of remittances to other jurisdictions or the black market.
In light of the multifaceted economic management quandary, the new economic team faces significant challenges that require swift and comprehensive solutions.
