The Central Bank of Nigeria (CBN) said it has successfully cleared the entire valid foreign exchange (FX) backlog, marking a significant milestone in the nation’s fight against FX volatility.
This accomplishment, long-awaited and ardently pursued, was formally announced by Mrs. Hakama Sidi Ali, the Bank’s Acting Director of Corporate Communications. Mrs. Ali’s announcement signifies the CBN’s steadfast commitment to addressing the substantial backlog of outstanding FX claims inherited by the CBN Governor Mr. Olayemi Cardoso, totaling an estimated $7 billion.
Mrs. Ali disclosed the finalization of payments amounting to $1.5 billion in the capital city of Abuja.
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According to a statement issued by the CBN, transparency and accountability formed the bedrock of this achievement, with Deloitte Consulting’s independent auditors meticulously examining each transaction to ascertain its legitimacy. Any discrepancies or irregularities identified were promptly flagged for further scrutiny by relevant authorities, underscoring the CBN’s commitment to upholding the highest standards of financial integrity.
A statement from the CBN further said: “She [Mrs. Ali] noted that the CBN recently concluded the payment of $1.5 billion to settle obligations to bank customers, effectively settling the residual balance of the FX backlog. She also disclosed that independent auditors from Deloitte Consulting meticulously assessed these transactions, ensuring that only legitimate claims were honored. Any invalid transactions were promptly referred to the relevant authorities for further scrutiny.”
The apex bank further noted that this milestone was bolstered by a substantial surge in Nigeria’s external reserves, which skyrocketed by $993 million to reach $34.11 billion as of March 7, 2024, marking an eight-month high. In addition, the remarkable increase was fueled by heightened remittance payments from Nigerians abroad and increased interest from foreign investors in local assets, particularly government debt securities.
“Clearance of the foreign exchange transactions backlog is part of the overall strategy detailed in last month’s Monetary Policy Committee meeting to stabilize the exchange rate and thereby curb imported inflation, spurring confidence in the banking system and the economy, the CBN said in a statement.
“Cardoso used the MPC meeting and a subsequent conference call with foreign portfolio investors to set expectations for sustained increases in Nigeria’s foreign currency reserves and improved liquidity in the foreign exchange market.
“The CBN followed this month by reporting a significant increase in external reserves, rising by $993 million to $34.11 billion as of March 7, 2024, the highest level in eight months. The month-on-month increase was driven by a marked advance in remittance payments by Nigerians overseas, as well as higher purchases of local assets, including government debt securities, by foreign investors.”
The clearance of the FX backlog is seen as a significant feat by the CBN that is likely going to help in stabilizing the exchange rate and curbing imported inflation. Attributed also to the uptick in oil output, this development is believed to have set the stage for sustained growth in Nigeria’s foreign currency reserves and enhanced liquidity in the foreign exchange market.
In February, Governor Cardoso disclosed that approximately $2.4 billion of the FX backlog was deemed invalid for settlement following a forensic audit by Deloitte Management Consultant.
The recent efforts by the CBN to stabilize the naira have yielded positive results, with the parallel market trading at N1,590/$1 on Wednesday. Additionally, the exchange rate on the official market fell to N1,560/$1 on Tuesday, marking the strongest performance of the naira since March 4.
With the FX backlog cleared and external reserves fortified, the naira is expected to sustain its recent gain, with some analysts predicting it will rise above N1,000 per dollar by December.