The Central Bank of Nigeria (CBN) has announced its plan to clear the huge backlog of foreign exchange (forex) demand in the country within the next two weeks.
The acting governor of the CBN, Folashodun Shonubi, disclosed this at a forum in Lagos yesterday.
He said the CBN is working with commercial banks, which account for 75 per cent of the forex transactions, to clear the backlogs through different structures within the forex market. The backlogs, estimated at about $10 billion, consist of various dollar requests from different sectors and individuals.
Some of the dollar requests include those from manufacturers and importers who need to buy raw materials from abroad, parents who want to pay their children’s school fees abroad, Nigerians who have medical bills abroad, travellers who need Business Travel Allowances (BTAs) and Personal Travel Allowances (PTA), among others.
These requests have been pending for years due to the scarcity of dollars in the country, caused by the decline in foreign direct investments (FDIs) and foreign portfolio investments (FPIs) inflows, the depletion of foreign reserves, and other external factors.
Shonubi said the local banks have already taken on a large amount of the obligations and have been making forex available to their customers at maturity. He added that some customers still have outstanding obligations and that the CBN and the banks are working on a restructuring plan to clear them.
“That is something we have been discussing for a while. I expect that we will do that, within the next one or two weeks. What that means, therefore, is that this obligation that people keep on talking about will not be left.
“Today, we still intervene in the market, so it is not as if it has affected our ability to make monies available to banks in the Investors and Exporters foreign exchange market,” Shonubi said.
He also explained that the role and depth of the CBN intervention in the forex market is often overemphasised. He said the CBN currently contributes less than 25 per cent to the forex market and that its aim is to stabilise the rates rather than be a regular player.
He further said that there are many forex transactions that go on through the commercial banks without the CBN’s input.
“There are so much more foreign exchange that people don’t talk about, that is being made available through the banking system and 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,” Shonubi said.
He also dismissed what he called ‘misinformation’ that the CBN owes JP Morgan $7 billion forex forwards. He said there is no outstanding $7 billion with JP Morgan in any form and that it was based on an opinion that was put on paper and everybody jumped on it.
However, according to the 2022 audited financial statements of the CBN1, the apex bank received a combined $15 billion cash from JP Morgan and Goldman Sachs in one year.
The CBN Group had entered into a securities lending agreement with Goldman Sachs and J.P. Morgan and as part of the agreement, the Group pledged its holdings on foreign securities in return for cash. The statement said that the cash received from Goldman Sachs was N0.23 trillion ($500 million), 2021: N0.22 trillion ($500 million) and JP Morgan was N2.76 trillion ($6 billion), 2021: N3.32 trillion ($7 billion).
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