CBN Resolves $10 Billion Forex Backlog, Eases Cash Fears and Boosts Market Confidence

The Central Bank of Nigeria (CBN) has embarked on the resolution of a significant foreign exchange backlog, surpassing $10 billion, owed to commercial banks and foreign airline operators. In response to concerns over alleged cash scarcity in banking channels and the approaching festive period, the CBN reassured the public of an ample supply of banknotes, dispelling worries about a cash shortage.

Attributing apparent cash shortages in certain areas to heightened withdrawals by Deposit Money Banks (DMBs) from CBN branches and panicked ATM withdrawals, the CBN clarified that the situation does not signify an overall scarcity. Reports of panic withdrawals in some regions were triggered by apprehensions about a potential banknote shortage during the upcoming festive season, especially considering the continued use of redesigned higher-denomination currency notes following a court extension till December 2023.

The CBN affirmed its commitment to ensuring sufficient currency availability for economic activities across the country. Emphasizing the adequate stock of currency notes, the CBN urged the public to avoid panic withdrawals and encouraged the adoption of alternative payment methods to reduce the pressure on physical cash transactions.

Furthermore, the CBN has initiated the clearing process for the backlog of over $10 billion in foreign currency forwards owed to banks. Citibank communicated to its customers the CBN’s resolution of all outstanding matured forex obligations, assuring them of the completion of this process.

In tandem with the CBN’s efforts, airlines have started witnessing the clearance of their backlog of funds. Stanbic IBTC also indicated the initiation of clearing forex backlogs, albeit the exact total cleared remains undetermined.

CBN's Director of Corporate Communications confirmed the commencement of paying off the foreign exchange backlogs, with 14 banks already receiving payments, as reported by Reuters. The payments, totaling about $1 billion, have relieved local lenders grappling with persistent dollar shortages.

This development aligns with Finance Minister Wale Edun's announcement regarding anticipated inflows of $10 billion to alleviate the forex market's liquidity issues. The settlement process, commencing with international banks like Citibank, has already begun, potentially infusing confidence in the market and bolstering the Naira's value.

The recent progress in resolving the backlog comes in the wake of Air Peace's chairman alleging a $24 million debt owed by the CBN, amidst the forex crisis. Minister Wale Edun had earlier disclosed the imminent arrival of $10 billion in foreign currency to mitigate the forex challenges. This promising development signifies a potential positive turn for Nigeria's financial landscape.