In the midst of mounting economic challenges in Nigeria, President Bola Tinubu has pledged to uphold the country’s foreign exchange obligations, particularly with regards to forward contracts. These financial agreements, initiated by the Central Bank of Nigeria (CBN), have been a crucial component of the country’s international trade.
Forward contracts are agreements where two parties commit to exchanging a specified amount of one currency for another at a predetermined future date and exchange rate. The CBN had promised Nigerian businesses fixed amounts of dollars at agreed-upon prices, enabling them to open Letters of Credit (LCs) and import goods from foreign suppliers with confidence.
However, since February 2023, the CBN has been unable to fulfill its commitments, resulting in a significant backlog of approximately $3 billion owed to these businesses. This backlog has disrupted supply chains and eroded foreign investor confidence, potentially deterring future investments and hampering economic growth.
Moreover, the shortage of foreign exchange liquidity has forced the CBN to suspend various transactions, causing inconvenience and financial difficulties for individuals who rely on these services.
At the 29th edition of the Nigeria Economic Summit Group (NESG), President Bola Tinubu announced the government’s commitment to honor all legitimate contracts, including forward contracts related to foreign exchange obligations. He emphasized the need to uphold the sanctity of these contracts and outlined a framework to ensure that these obligations would be met in due course.
The president also disclosed that the government is actively working to address the Forex backlog and reiterated the importance of public-private partnerships to achieve Nigeria’s ambitious economic goals. Tinubu’s vision includes a $1 trillion economy by 2026 and $3 trillion within the decade through sustainable and competitive growth. He emphasized the crucial role of the private sector in this endeavor and encouraged collaboration and support from industry leaders.
Tinubu further outlined plans for a new student loan program and consumer credit schemes to stimulate the economy, and the construction of affordable homes at a record pace. These initiatives aim to address the challenges faced by Nigerians and foster economic growth.
The commitment of the Nigerian government to resolve the Forex backlog and promote economic growth underscores the importance of transparency and reliability in international financial agreements, vital for the stability and development of the country’s economy.
