CBN Unlocks $7 Billion Stuck in Foreign Exchange Transactions

Business a.m.

The Central Bank of Nigeria (CBN) has announced that it has fulfilled its promise to process the backlog of $7 billion in foreign exchange claims inherited from the previous administration

Hakama Sidi Ali, the acting director of corporate communications at the CBN, made the disclosure in a statement seen by Business a.m.  Ali noted that the CBN had recently paid $1.5 billion to settle outstanding obligations to bank customers, effectively settling the residual balance of the foreign exchange backlog.

 Ali further disclosed that independent auditors from Deloitte Consulting had meticulously assessed each of these transactions to ensure that only valid claims were honoured.  She added that any claims deemed invalid were promptly referred to the appropriate authorities for further review, ensuring that all transactions were carried out in accordance with the highest standards of ethical and legal compliance.

In a previous meeting, Cardoso had highlighted the importance of clearing the FX backlog as a key step towards restoring credibility and confidence in the Nigerian economy. 

He added: “It was important that we go through an independent and credible process that would determine the authenticity of those obligations, and, at this point, I can tell you that we have now cleared all genuine, verifiable transactions. This encumbrance to market confidence in the country’s ability to meet its obligations is now totally behind us.” 

The CBN’s strategy to settle the FX backlog is in line with the broader monetary policy outlined at the last Monetary Policy Committee (MPC) meeting, which aims to stabilize the exchange rate and curb imported inflation. 

In both the MPC meeting and the subsequent conference call with foreign portfolio investors, Cardoso stressed the importance of sustaining increases in Nigeria’s foreign currency reserves and improving liquidity in the foreign exchange market. 

The CBN’s efforts appear to be paying off, as evidenced by a recent increase in external reserves. In March 2024, the country’s external reserves increased by $993 million, reaching $34.11 billion as of March 7, the highest level in eight months. This increase was driven by several factors, including a significant increase in remittance payments from Nigerians living abroad, as well as higher purchases of local assets, such as government debt securities, by foreign investors.