With yesterday’s injection of $500 million into the Foreign Exchange (forex) market, the Central Bank of Nigeria (CBN) has reduced the $10 billion backlog of verified forex transactions by $2.5 billion.
The apex bank, which paid $61.64 million on January 7, said it had paid additional $2 million out of the forex backlog.
The payment in tranches is a demonstration of the bank’s commitment to addressing the persistent liquidity challenges facing importers and businesses, a statement from its acting Director, Corporate Communications, Mrs. Hakama Sidi Ali, said yesterday.
The latest intervention targets outstanding commitments across the manufacturing, aviation and petroleum sectors.
Mrs. Ali reiterated the bank’s dedication to clearing the backlog within a reasonable timeframe.
Beyond immediate interventions, the CBN emphasizes its long-term vision for a stable and efficient FX market.
Mrs. Ali assured Nigerians that a comprehensive strategy has been developed to tackle the underlying issues that hamper the market’s effectiveness.
She said: “This strategy prioritizes streamlining the numerous exchange rates, fostering transparency, and minimizing arbitrage opportunities.
“The expected outcome of these reforms, as expressed by the CBN, is a more stable exchange rate environment, which will ultimately attract foreign investment and bolster investor confidence.
“We believe that a stable exchange rate will boost investor confidence and attract foreign investment.”
Demanding responsible behaviour from all participants in the forex market, the CBN called for strict adherence to regulations. The apex bank also emphasized the importance of transparency in ensuring fair exchange rate determination, leading to stability for both businesses and individuals.
The CBN’s recent interventions represent significant progress in tackling the $10 billion backlog, Mrs. Alli noted.
As the CBN Governor Yemi Cardoso aptly stated last year, “clearing the backlog is housekeeping, which makes the work of stabilising the exchange rate progress in the right direction.”
The ongoing efforts of the CBN point towards a brighter future for the forex market and its contribution to the overall economic growth, the prevailing challenges notwithstanding.
However, the information on the exact size and composition of the CBN forex backlog is limited.
CBN has been releasing funds in installments to various sectors, but it has not disclosed the total outstanding amount as of today.
Among the sectors affected are: manufacturing (importers of raw materials and machinery struggle to access forex); aviation (airlines facing difficulties paying for maintenance and leasing of aircraft) and petroleum (upstream and downstream activities require forex for imports and equipment).
The reasons for limited information, a source at the CBN explained, could be attributed to market sensitivity.
The source said “disclosing the total backlog could potentially further depreciate the naira due to increased demand for forex. The CBN might be releasing funds strategically to avoid market turbulence and ensure effective allocation”.
