The Central Bank of Nigeria (CBN) recently made headlines with its announcement that it aims to reduce foreign exchange (FX) backlogs within a mere two-week timeframe. However, Economic Experts Cast Doubt on CBN’s about the feasibility of such a swift resolution.
Acting Governor of the CBN, Folashodun Shonubi, revealed during a media briefing that the CBN has been collaborating with commercial banks to devise strategies for clearing the backlogs. Economic Experts Cast Doubt on CBN’s He emphasized that these measures have been adopted to facilitate the availability of foreign exchange for importers and exporters. Shonubi stated, “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.”
Shonubi also highlighted that the CBN is actively intervening in the FX market, contributing less than 25% of the FX volumes, with a significant portion made available through the banking system. He expressed confidence in clearing the backlog within two weeks.
However, economic experts contacted by Daily Sun have expressed skepticism regarding this ambitious timeline, suggesting that it could take months to successfully reduce the FX backlogs. David Adonri, Vice-Chairman of the Board at HighCap Securities, questioned the feasibility of the CBN’s plan, especially considering the substantial pending FX backlogs from various sectors, including students, businessmen, and manufacturers. Adonri remarked, “I saw that in the news, and I merely laughed. Do I think this is realistic? I do not think so because this is not tenable.”
Another analyst, speaking anonymously, echoed similar sentiments, raising concerns about the source of liquidity required for such a massive undertaking. He referenced recent reports, including one from JP Morgan, which questioned the CBN’s financial stability. He emphasized that despite oil prices reaching as high as $90 per barrel, the supply of foreign exchange in Nigeria has not been as robust as expected. This has raised questions about the actual source of liquidity within the country’s financial system.
Kurfi Garba, Managing Director of APT Securities, urged caution on the part of the CBN, warning that any missteps in their approach could lead to an unfavorable exchange rate for the Naira.
In conclusion, while the CBN’s commitment to resolving FX backlogs is laudable, the ambitious two-week timeline has raised skepticism among experts. The complexities of the FX situation, combined with questions about liquidity sources and the sheer volume of backlogs, suggest that a longer timeframe may be required to achieve the desired results. Economic stakeholders will be closely watching to see how the CBN addresses these challenges in the coming months.
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