Nigeria's Central Bank clears remaining valid FX backlog as external reserves rise by $993 million

The Central Bank of Nigeria (CBN) has announced the complete clearance of the valid foreign exchange backlog.

This significant achievement was shared by Mrs. Hakama Sidi Ali, the Bank’s Acting Director of Corporate Communications, highlighting a fulfilled promise by CBN Governor, Mr. Olayemi Cardoso, to tackle an inherited $7 billion in claims.

CBN pays fresh $1.5 billion

On Wednesday in Abuja, Mrs Ali revealed the CBN’s finalisation of payments amounting to $1.5 billion, thereby addressing the last portions of the FX backlog.

This step not only reflects the bank’s dedication to stabilising the national economy but also underscores the thorough verification process employed.

Deloitte Consulting’s independent auditors were tasked with examining these transactions closely, ensuring the settlement of only legitimate claims and referring any questionable transactions to the relevant authorities.

A statement from the CBN read: “She 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 honoured. Any invalid transactions were promptly referred to the relevant authorities for further scrutiny.”

$993 million rise in external reserves

Complementing this economic progress, the CBN reported a remarkable boost in Nigeria’s external reserves, which increased by $993 million to $34.11 billion as of March 7, 2024, reaching an eight-month high.

This rise was fueled by increased remittance payments from Nigerians abroad and heightened interest from foreign investors in local assets, including government debt securities.

With these developments, Nigeria is on a promising path towards renewed economic stability and confidence, signalling a bright future for the nation’s financial health.

The statement added: “Clearance of the foreign exchange transactions backlog is part of the overall strategy detailed in last month’s Monetary Policy Committee meeting to stabilise the exchange rate and thereby curb imported inflation, spurring confidence in the banking system and the economy.

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.”

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The CBN governor, Yemi Cardoso, in February, disclosed that about $2.4 billion foreign exchange backlog is not valid for settlement.

Cardoso clarified that out of the initially reported $7 billion FX liabilities of the federal government, about $2.4 billion were identified as invalid following a forensic audit by Deloitte Management Consultant.

The audit’s findings showed various infractions, including non-existent entities and unauthorized FX allocations, making these liabilities invalid.

About three weeks ago, Cardoso said that the remainder of the bank’s FX backlogs will be cleared in the next few days- most likely in a week and a half.  This was around the time the bank settled about $400 million of valid FX backlog.

The CBN’s recent efforts to stabilise the naira seems to be productive as parallel market operators quoted a buy price of N1400/$1 for holders of dollars looking to sell marking a significant strengthening on the naira on Wednesday.

Meanwhile, the exchange rate on the official market fell to N1,560/$1 on Tuesday the strongest the naira has traded since the 4th of March when it closed at N1534/$1.