Emily Johnson
Wed, Sep 6, 2023 8:00 AMCentral Bank of Nigeria to Resolve Forex Backlog Within Two Weeks
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The Central Bank of Nigeria (CBN) has announced its plan to resolve the unsettled forex backlog within the next two weeks. This move comes as the bank collaborates with commercial banks to address the liquidity issues in the foreign exchange market in the country. The backlog, estimated around $2 billion to $2.5 billion, has been a cause of concern for local businesses and foreign investors. The CBN's ability to clear the backlog and provide stability in the forex market is crucial for rebuilding investor confidence and the success of the recent currency float reform in Nigeria.
Nigeria's Central Bank has outlined its intention to tackle the significant backlog of unsettled foreign exchange (forex) within the next two weeks. The bank's Acting Governor, Mr. Folashodun Shonubi, revealed the collaboration between the central bank and commercial banks in a bid to resolve liquidity issues in the country's foreign exchange market.
The forex backlog has been a recurring issue, with estimates ranging from $2 billion to $2.5 billion. This unsettled sum has affected local businesses, foreign investors, and overall investor confidence in the market. The CBN's plan to clear the backlog and bring stability to the forex market is crucial, particularly after recent currency float reform measures.
Efforts to address the backlog have been ongoing, with the CBN working closely with commercial banks to find sustainable solutions. The maturity of existing obligations has allowed certain banks to release forex to importers and other customers. However, customers with outstanding obligations are being actively supported by the banks and the CBN to resolve these issues.
The central bank's proactive approach involves collaborating with commercial banks on restructuring certain obligations, with the aim of clearing the backlog firmly in sight. The resolution is expected within the next one to two weeks, providing much-needed relief for businesses and stakeholders affected by the backlog.
While the CBN has faced challenges in managing the forex backlog, foreign investors remain concerned about the impact on their confidence in Nigeria's investment landscape. Nigeria's external reserves, valued at $34 billion, have been a source of inquiry, as investors question why these reserves have not been utilized to settle the contracts.
The forex backlog represents less than 10 percent of Nigeria's external reserves, making it a viable challenge to address. As such, the CBN's commitment to resolving the issue is viewed as a top priority for the new administration.
A currency forward contract ensures a predetermined exchange rate for future currency transactions. Clearing the forex backlog allows businesses, particularly manufacturers and importers, to gain access to the necessary funds required for operations in a timely manner.
The CBN's recent efforts demonstrate its commitment to fostering a supportive business environment and rebuilding investor confidence. As Nigeria continues to navigate economic reform, resolving the forex backlog is paramount for sustainable growth and attracting foreign investment.
It is expected that the resolution of the forex backlog will not only improve liquidity in the foreign exchange market but also contribute to the overall stability of the Nigerian economy. The success of the CBN's efforts will set the tone for future reforms and the country's ability to attract foreign investors.
Source of content: OOO News 2023-09-06 News
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