Relief in Sight as CBN Pares Down FX Backlog

The Central Bank of Nigeria (CBN) has begun to clear the backlog of foreign exchange forward contracts — a move that is expected to bring relief to the naira, the business community and the economy at large.

The country has faced chronic dollar shortages since foreign investors exited local assets during a period of low oil prices. Since then, investors are yet to return and the central bank has struggled to meet the demand for dollars from foreign investors seeking to repatriate funds or airlines seeking to send money from ticket sales abroad.

On Thursday, people with knowledge of the matter who spoke to BusinessDay said the CBN has started clearing the backlog and delivered on over 75 percent to 80 percent of outstanding matured FX forwards in some specific banks.

Nigeria has nearly $7 billion in FX 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 the October 23 announcement by Wale Edun, the finance minister, that Nigeria was expecting $10 billion of inflows to improve FX 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 naira gained 55 against the United States dollar at the black market on Thursday. It opened at N1,220 per dollar but closed at N1,165.