The Central Bank of Nigeria, acting on behalf of the Federal Government, has initiated the process of settling outstanding matured foreign exchange (FX) forwards owed to various creditors, according to sources familiar with the situation. This development was confirmed on Thursday, although specific details of the payments remain undisclosed.
Unconfirmed reports suggest that three banks, namely Citi Bank, Stanbic IBTC, and Standard Chartered Bank, have received full payments for their debts. The total amount of overdue forward payments is estimated at $6.7 billion, as stated by the Minister of Finance, Wale Edun.
As a response to this news, the value of the Nigerian naira strengthened in the foreign exchange market, rising to N1,120 against the US dollar. This represents a 4.27% appreciation compared to its value of N1,170 against the dollar on the previous day. Currency traders, also known as Bureaux De Change operators, noted that the naira had experienced a rapid recovery from its earlier rate of N1,170/dollar, closing at N1,120/dollar.
In Lagos, the naira traded at an average rate of 1,120/$ on Thursday, with variations observed in different locations. In Abuja, the average exchange rate was 1,200 naira against the dollar.
Although three banks have reportedly received full payments, it should be noted that there are a total of 21 commercial institutions operating in the country, and not all of them have received payments yet. The specific amount of payments received by the banks has not been disclosed.
Stanbic IBTC and Citi Bank have both confirmed the receipt of FX forwards payments from the Central Bank. Stanbic IBTC stated that “the apex bank began clearing the backlog of outstanding Retail SMIS obligations,” while Citi Bank issued a statement saying, “CBN HAS DONE IT” and encouraged its customers to seek clarification from their Relationship Manager or Trade Service Professional.
The payment process, referred to as the “Settlement of Matured FX Forwards by CBN,” was conducted gradually and discreetly. According to sources, it started on the previous day and continued through the night.
Although some banks have received payments, the majority of outstanding FX forwards are with tier 1 banks, which are yet to be settled. However, there is optimism that they will be addressed in subsequent tranches, possibly with a lower percentage settlement.
A CEO of a Tier 2 bank confirmed that their bank received $100 million from the Central Bank and expressed confidence that the remaining outstanding amounts would be settled soon, which is viewed as a positive development for the economy and trade.
Nevertheless, some commercial banks that have not received payments have expressed dissatisfaction and allege that the Central Bank has denied them their rights.
In response to these developments, the Association of Corporate Treasurers of Nigeria has commended the Central Bank’s decision to settle matured foreign exchange forwards, considering it a significant step in promoting stability and confidence in Nigeria’s foreign exchange market. The association views this action as aligned with the Central Bank’s commitment to ease of doing business and reducing market uncertainty.
Other industry experts and stakeholders have also shared their perspectives on the situation. While there is optimism regarding the FX management under the new administration, concerns remain about the transparency of the process, the sustainability of intervention, and the broader economic challenges facing Nigeria.
President Bola Tinubu had previously assured Nigerians and investors of plans to boost the country’s foreign exchange liquidity, with the expectation of $10 billion inflows to clear forex backlogs and stabilize the naira.
In conclusion, these recent developments signal potential improvements in Nigeria’s foreign exchange situation, although the full impact and sustainability of the measures remain to be seen.
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