Cardoso Fulfills His Promise as He Clears $7 Billion Inherited FX Backlogs

On Wednesday, the Central Bank of Nigeria (CBN) announced that all previous pending valid foreign exchange backlogs were officially cleared, thereby fulfilling one of the important pledges Mr Olayemi Cardoso, the CBN governor, made when he was elected into office. It was reported that Cardoso inherited a foreign exchange backlog of $7 billion from the past governor, Godwin Emefiele.

The notice of the debt clearance was made public on Wednesday through Hakama Sidi Ali, the acting director of corporate communication at the CBN.

She stated that the CBN has 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 noted that the independent auditors from Deloitte Consulting meticulously assessed the transactions, ensuring that only legitimate claims were honoured.

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Mrs Hakama Sidi Ali added that any invalid transaction was promptly referred to the relevant authorities for further scrutiny.

Before the announcement, which was some days back, the CBN governor, Olayemi Cardoso, in one of the meetings, said that,

"We made clearing the FX backlog a priority to restore credibility and confidence in the Nigerian economy.

"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," he added.

Clearing the foreign exchange transaction backlog is among the overall strategies detailed in last month's Monetary Policy Committee (MPC) meeting to stabilise the exchange rate and curb imported inflation, spurring confidence in the banking system and the economy.

According to a report, Cardoso used the MPC meeting and a follow-up conference call with foreign portfolio investors to set targets for sustained increases in Nigeria's foreign currency reserves and increased liquidity in the foreign exchange market.

The CBN then revealed that as of March 7, 2024, its external reserves had increased by $993 million to $34.11 billion, the highest level in eight months. According to the apex bank, the month-over-month rise was primarily caused by a significant increase in remittance payments from Nigerians living abroad and an increase in foreign investors' purchases of local assets, such as government debt securities.

Back Story

The Central Bank of Nigeria (CBN) announced in January that it would disburse $500 million to different sectors of the economy to follow up on its recent payment of over $2 billion to clear outstanding debts in the manufacturing, aviation, and petroleum sectors.

Mrs Hakama Ali, the Acting Director of the Corporate Communications Department at the CBN, announced this. She said that the CBN's move to disburse $500 million aligns with its commitment to addressing the backlog of verified foreign exchange transactions and that its management is committed to settling these transactions.

Speaking on the promises of the CBN Governor, Olayemi Cardoso, Mrs Hakama Ali stated that the CBN is putting up a comprehensive strategy to boost liquidity in the Nigerian foreign exchange markets in the short, medium, and long term.

She also disclosed that the forex market reforms aim to streamline and unify multiple exchange rates, promote transparency, and reduce arbitrage opportunities.