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By Chinwendu Obienyi
Following the Central Bank of Nigeria (CBN) announcement that it is set to reduce the FX backlogs within two weeks, economic experts have stated that this is very much “impossible” for the apex bank to achieve that within that time frame.
The apex bank’s Acting Governor, Folashodun Shonubi, had at a media briefing, revealed that the CBN has been working with commercial banks on various structures to clear the backlogs, whilst stating that the banks have already taken up a large amount of the obligations.
This, he said, will help make foreign exchange available to importers and exporters. Shonubi said, “There are customers who still have their own obligations and part of the restructuring with the banks in Nigeria was to clear those backlogs. It is something that we have been discussing for a while and we expect that we will clear it between the next one or two weeks. What that means therefore is that this obligation that people keep talking about will not be there.
Today, we are still intervening in the market, so it is not as if it has affected our basic team to make monies available to the banks in the NFEM. When you look at the volumes, the CBN today contributes less than 25 per cent into the FX market. There is so much more foreign exchange that people do not talk about that is made available through the banking system.
It does not come through the CBN nor does it appear as part of the demand that comes to us; this volume is significant. It is almost three times what we at the CBN make available but the summary is that we hope to clear the backlog in two weeks”.
However, economic experts who spoke to Daily Sun via telephone, expressed skepticism while stating that it would take months to reduce the FX backlogs. Vice-Chairman, Board, HighCap Securities, David Adonri, said, CBN’s plan to clear the backlog is a crucial step in stabilizing the Nigerian currency, the naira, which has been under pressure due to FX shortages, but cannot meet that deadline.
Adonri said, “I saw that in the news and I merely laughed. We have huge pending FX backlogs especially from both the students, businessmen and manufacturers who did theirs this year. Do I think this is realistic? I do not think so because this is not tenable”.
Another analyst who pleaded for anonymity, shared similar sentiments, stating that the CBN’s announcement appeared more like a mere talk. He raised questions about the source of liquidity for such a massive undertaking. “Although the apex bank has denied that the JP Morgan’s report is false, I do not think that report was just a flash in the pan. Ever since I read JP Morgan’s report about the exposure and leverage the CBN has, and more recently, a Fitch rating highlighted that the CBN engaged in swaps with commercial banks totaling up to $10 to $12 billion, it has become evident that all is not well within our financial system.
When you delve into the figures, considering the number of foreign exchange deposits and our earnings, even with oil prices touching $90 per barrel, it is clear that the supply of foreign exchange has not been as robust as one would hope. Nigeria doesn’t claim the lion’s share of the oil sales; we only participate to a certain extent. This situation raises a crucial question: Where is the liquidity really coming from?” he probed.
For his part, the Managing Director, APT Securities, Kurfi Garba, said, “The CBN have to be very cautious because any mistake in their approach could push the Naira to a significantly unappealing exchange rate”.
