The Central Bank of Nigeria (CBN) plans to boost foreign exchange liquidity as well as settling the backlog of requests by local businesses over the next two weeks while increasing supply to the Bureau De Change (BDC) segment.
The acting CBN governor, Mr. Folashodun Shonubi stated this in Lagos while speaking on the role players in the foreign exchange market should play to ensure there is liquidity in the system, especially, the BDC segment of the market.
He noted that the apex bank is working with commercial banks in the country to clear the unsettled foreign exchange backlog owed to local businesses that are currently hurting companies, in the next two weeks.
According to him, the CBN alongside commercial banks in the country have been working towards clearing the backlog that is variously put between $2 billion and $2.5 billion. “We have been working at the central bank with commercial banks on various structures to clear it. As a matter of fact, there’s a large amount of the obligations that the banks in Nigeria have already taken off.
“So what happened was at that maturity, they actually made the foreign exchange available for those who needed to use it, the importers and what have you. So we are discussing with them so that we can restructure their own.
“Some customers who still have their own obligations with their banks are being addressed by the banks and our structure with the banks in Nigeria was to clear that backlog. It is something we’ve been discussing for a while and we expect that we will clear it within the next one or two weeks,” he pointed out.
Liquidity has been tight at the forex market with investors adopting a wait and see stance after the reforms in the forex market.
According to analysts at Cordros Research, there has been no further positive news flows regarding other measures to stem the slide of the Naira.
“The preceding, in addition to the lingering low crude oil production and foreign investors remaining on the sidelines, are expected to weigh on forex supply in the near term. Consequently, we expect forex liquidity constraints to linger in the short term, ensuring the local currency pressures remain intact,” Cordros Research noted.
The Central Bank of Nigeria (CBN) has been grappling with an unsettled foreign exchange backlog owed to local businesses in the last few years hurting investors’ confidence. Nigerian businesses from manufacturers to importers, who have been on a long queue for dollars, are not the only ones worried about the backlog, which is also undermining foreign investor confidence in the CBN’s move to float the naira last month.
Some estimates put the backlog at between $2 and $2.5 billion, which equates to less than 10 percent of the country’s external reserves.
One year ago, precisely in August 2022, the CBN released $265 million out of the total $464 million trapped funds to foreign airlines leaving a balance of $199 million to clear the backlog.
According to the CBN, the funds will enable the airlines to settle outstanding ticket sales. A breakdown of the figure indicates that the sum of $230 million was released as a special FX intervention while another sum of $35 million was released through a Retail Secondary Market Intervention Sales (SMIS) auction.
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