The Central Bank of Nigeria (CBN) has announced its plan to clear the backlog of foreign exchange (FX) demands within the next two weeks. Mr. Ade Shonubi, the acting governor of the CBN, revealed this during a press conference in Lagos. He stated that the partnership between local banks and the CBN would facilitate the clearance of the estimated $10 billion backlog.
Shonubi emphasized the efforts made by Nigerian banks in meeting the foreign exchange demand, stating that they contribute three times more FX than the central bank. This aligns with the CBN’s recent shift from actively participating in the foreign exchange market to focusing on regulatory functions. The acting governor assured that the backlog would be cleared in the next one or two weeks, thanks to the restructuring with the banks.
To stabilize the FX rate and address the backlog, the CBN has explored various approaches in recent weeks. An earlier plan to inject liquidity into the foreign exchange market using a $3 billion loan secured by the Nigerian National Petroleum Corporation fell through, leaving the African Export-Import (Afrexim) Bank as the sole provider.
Clearing the backlog of FX demand is crucial for boosting investor confidence in Nigeria and ensuring stability in the FX rate. The rapid devaluation of the Naira, which shot up from $1/₦462 to $1/₦700 and even as high as ₦920 on the parallel market, has posed significant economic challenges. Startups that raised funds in dollars are particularly affected, with some founders expressing concerns that many businesses might have to shut down.
Addressing media reports, Shonubi clarified that the backlog did not hinder the CBN’s ability to provide foreign currency to banks. He also dismissed claims of a $7 billion debt owed to JP Morgan, labeling them as “misinformation.”
The backlog of FX demands has negatively impacted investor confidence in Nigeria, with concerns about the ability to repatriate profits. Foreign airlines, for instance, have faced difficulties in accessing their revenue, with approximately $812 million stuck in Nigeria. However, recent progress made by the CBN has led to the withdrawal of funds by many airlines. Additionally, foreign investors have successfully repatriated over $5 billion worth of dividends from the country between October 2022 and March 2023.
In conclusion, the CBN’s commitment to clearing the backlog of FX demands within the next two weeks is expected to restore investor confidence and bring stability to the FX rate in Nigeria.
