CBN to clear $10b FX backlogs in 2-weeks, says Shonubi

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.Denies $7b debt with JP Morgan

. Accuses BDCs of FX round tripping

. Says non-digitised BDCs to lose licenses 

 

The Central Bank of Nigeria (CBN) is working with commercial banks to clear $10 billion forex backlogs within the next two weeks, its Acting Governor, Folashodun Shonubi has announced.

Speaking  yesterday at a media forum in Lagos, he said the backlogs will be cleared  through different structures within the forex market.

Shonubi said the banks, which controls 75 per cent of the forex transactions will play significant role in seeing that the backlogs go.

The backlogs, estimated at $8 billion to $10 billion,  constitute of dollar requests from manufacturers/ importers purchasing raw material inputs from abroad, parents paying their children’s tuition fees abroad,  Nigerians paying medical bills abroad, travelers sourcing Business Travel Allowances (BTAs), and Personal Travel Allowances (PTA), among others.

These requests, were stalled for years due to dollar scarcity, drop in Foreign Direct Investments (FDIs) and Foreign Portfolio Investments (FPIs) inflows,  drop in foreign reserves positions amongst other offshore investment opportunities.

The CBN boss Shonubi said the  local banks have been working with the central bank on various structures to clear it.

“As matter of fact, there is a large amount of the obligations that the banks in Nigeria have already taken on. So, what happened was that at maturity, they actually make the foreign exchange available for those who needed to use them like importers and what have you,” he said.

Continuing, Shonubi said: “There are some customers who still have their obligations and part of the restructuring with the banks in Nigeria, is also to clear that backlog. That  is something we have been discussing for a while. I expect that we will do that, within the next one or two weeks”.

“What that means, therefore, is that this obligation that people keep on talking about will not be left. Today, we still intervene in the market, so it is not as if it has affected our ability to make monies available to banks in the Investors and Exporters foreign exchange market,” he stated.

Shonubi explained that considering the volume of forex interventions, role and the depth of the CBN intervention is overemphasised.

“When we look at the volumes, the Central Bank of Nigeria today contributes less than 25 per cent into the FX market. And the aim if you remember about a year and a half ago, was that the central bank did not want to be a regular player, but more of intervening to stabilise the rates and that is where we are going,” he said.

Shonubi said a lot forex transactions go on through the commercial banks without the CBN’s input.

“There are so much more foreign exchange that people don’t talk about, that  is being made available through the banking system and banks are selling to their customers. It doesn’t come to the central bank, it doesn’t appear as part of the demand that comes to us. And it is significant. It is almost three times what we as a central bank, make available,” he said.

Shonubi also used the media forum opportunity to clear what he called ‘misinformation’ that the CBN owes JP Morgan $7 billion FX Forwards.

He said: I think you have misinformation. There is no outstanding $7 billion with JP Morgan in any form. It was based on the opinion that was put on paper and everybody jumped on it”.

But the 2022 audited financial statements of the CBN  showed that the apex bank received combined $15 billion cash from JP Morgan and Goldman Sachs in one year.

The CBN Group, the financial statements said, had entered into a securities lending agreement with Goldman Sachs and J. P. Morgan and as part of the agreement, the Group pledged its holdings on foreign securities in return for cash.

The statement explained that the cash received from Goldman Sachs was N0.23 trillion ($500 million), 2021: N0.22 trillion ($500 million) and JP Morgan N3.23 trillion ($7 billion), 2021: N3.05 trillion ($7 billion) was recognised in other foreign securities, bringing liabilities with both global institutions to $15 billion.

Shonubi also spoke on the need to modernize BDCs operations,  challenging operators to get technology compliant or lose their licenses.

He said the current BDC market is largely cash-driven, and  plan of the apex bank is to modernize their operations to reduce cash interactions.

Accusing BDCs of round-tripping, Shonubi said the BDCs were created to sell small value FX transactions,  but the operators don’t. “Even when they get the dollars that is available, they would rather keep it and sell in the black market,” he said.

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