*Lagos, Nigeria – September 25, 2023:*
Over two weeks after the Central Bank of Nigeria (CBN) promised to clear over $10 billion in foreign exchange debts owed to Deposit Money Banks (DMBs), the apex bank has not fulfilled its promise, according to investigations.
This delay in settling the forex debt comes as the Nigerian naira faced severe depreciation, with Bureau De Change (BDC) operators selling the currency at rates between 990/$ and 995/$ in Lagos, Abuja, and Kano over the weekend.
On the Investor & Exporter forex window, the naira appreciated to 747.76/$ on Friday, up from 772.98/$ on Thursday.
The former Acting CBN Governor, Folashodun Shonubi, had 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, as deposit money banks had helped clear overdue FX forward contracts.
However, multiple top bank executives have confirmed that, almost three weeks after the promise, the CBN has yet to fulfill its commitment. This situation has left banks in a tight FX liquidity position, leading some lenders to temporarily suspend various FX transactions, including school fees and Personal Travel Allowance applications.
The delay in clearing the forex debt has exacerbated dollar scarcity in the parallel market, as bank customers turn 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, although the CBN has disputed this figure. Reports have suggested that forward contracts and dollar swap deals between the CBN and banks amount to over $10 billion.
As of Sunday, the CBN had not provided immediate comments on the situation.
The continued depreciation of the naira and uncertainty in the forex market have raised concerns among operators in the Nigerian economy. They fear that rising costs of goods and services could lead to more factory closures and increased economic hardship.
Manufacturers anticipate higher production costs due to the rising cost of raw materials, which are often imported. The depreciation of the naira could make locally-made products more expensive than imported alternatives.
The President of the Manufacturers Association of Nigeria, Francis Meshioye, emphasized that the exchange rate challenges would lead to increased product prices. This situation poses a dilemma for consumers who may prefer cheaper imported products over locally-produced goods.
The volatility of the naira has been a significant concern for businesses and investors in Nigeria, with calls for urgent intervention to stabilize the currency and boost confidence in the forex market.
The newly appointed CBN Governor, Dr. Olayemi Cardoso, inherits these challenges and is expected to address the issues facing the Nigerian economy, including forex stability and debt obligations.
Analysts suggest that the CBN must strategically and transparently intervene in the forex market to reduce volatility. Clearing the backlog of forex obligations should also be a priority to restore confidence among domestic and foreign investors.
The economic challenges in Nigeria are complex, and a comprehensive approach is needed to address them effectively and minimize the impact on businesses and consumers alike.
