The Central Bank of Nigeria announced that it made tranche payments to 31 banks in order to erase a backlog of foreign exchange forward obligations.
According to The Times, in order to handle the foreign exchange concerns, the apex bank further revealed that it had established frameworks for foreign exchange.
This information was revealed on Friday at the bankers’ dinner in Lagos by CBN governor, Yemi Cardoso.
The CBN governor stated, “We have already seen improvements in FX market liquidity in recent weeks, as the market responded positively to tranche payments made to 31 banks to clear the backlog of FX forward obligations.
“We have been thoroughly verifying these payments to make sure that only legitimate transactions are fulfilled. In a properly functioning market, it is reasonable to expect significant FX liquidity, with daily trade potentially exceeding $1.0 billion.
“We believe that foreign exchange reserves can be restored to comparable levels with similar economies if discipline and focused commitment are applied.”
Due to the nation’s issues with foreign exchange illiquidity and its failure to pay down its FX backlog, the value of the Nigerian naira has been progressively falling.
President Bola Tinubu has stated that he plans to settle the over $7 billion in unpaid foreign exchange obligations owing to banks.
During the 29th Nigerian Economic Summit in Abuja, Tinubu promised more foreign exchange liquidity while acknowledging the difficulties the corporate sector is facing in the financial markets.
It was also discovered that the CBN has begun to settle some of its foreign exchange obligations with Standard Chartered, Citibank, and Stanbic IBTC.
This discovery should help reduce the foreign exchange backlog that has been undermining investor confidence in the Nigerian economy.
The CBN made every attempt to reduce pressure and clear the backlog of foreign exchange, but issues with the FX’s efficient disbursement continued.
It was recently revealed by foreign airlines that nearly 90% of their $783 million in stuck payments remained unpaid.
Additionally, the EIU stated that the CBN “lacks the firepower to adequately supply the market or clear a backlog of foreign exchange orders, valued at over US$6bn, which will keep foreign investors unnerved, which might make a currency float unsuccessful between 2024 and 2028.”
The governor of the CBN has stated that commitments will still need to be paid until the FX backlog is entirely resolved.
