The Central Bank of Nigeria (CBN) has commenced clearing the foreign exchange (FX) forwards backlog in banks. This development was revealed by the spokesperson of the apex bank, Isha Abdulmumin stating that an initial payment of $ 1 billion has been made “The CBN has started paying the FX backlogs to banks. So far, 14 banks have been paid,” Isah Abdulmumin told Reuters but declined to give the amount or name of the banks. Four banking sources said the banks were paid varying amounts totalling about $1 billion and that the payments would continue in the next few weeks. While a few of the lenders were paid the entire amount owed, others got as much as 80% of the backlog, the sources said.
Nigeria has nearly $7 billion in forex forwards that have matured, which corporates bought from local banks. Banks then repaid foreign credit lines with their own funds when the central bank did not pay out.
The central bank’s payments follow Finance Minister Wale Edun’s Oct. 23 announcement that Nigeria was expecting $10 billion of inflows to improve foreign exchange market liquidity. It will come as a relief to local lenders, who have been struggling to meet demands from customers due to chronic dollar shortages in Africa’s largest economy. “The fulfillment of obligations…will free up credit lines,” Abuja-based economic analyst Kelvin Emmanuel said. “I expect that within the next week or two, banks will be able to open letters of credit at fair value.”
Central bank governor Yemi Cardoso has said clearing the backlog was a priority but gave no timeline for how long it would take.
More so, the CBN assured the public that it has enough volume of banknotes to go around even in the approaching festive period, calling off allegations of cash in the banking sector. CBN claimed in reaction to reports of alleged scarcity of cash at banks, automated teller machines (ATMs), Points of Sale, and Bureaux de Change (BDCs) in some major cities across the country.
CBN in a statement said the seeming cash scarcity in some locations is due largely to high volume withdrawals from the CBN branches by Deposit Money Banks (DMBs) and panic withdrawals by customers from the ATMs.
There had been reported cases of panic withdrawals in parts of Nigeria over fears that the banknote could be scarce as was experienced in 2022 end-of-the-year festivities, especially as the bank is yet to comment on continued use of the redesigned higher-denominations of the old currency notes. The court had extended the use of the old banknotes till December 2023 to allow a better circulation of the new notes. The CBN is here to make its position known on the issue.
