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CBN uncovers $2.4 bn invalid Forex claims pressuring the Naira –Cardoso

Dr. Olayemi Cardoso, Governor of CBN

*Dr. Olayemi Cardoso, Governor of the Central Bank of Nigeria, in a recent interview, declares that those making false Forex claims of $2.4 billion, by putting undue pressure on the Naira, the country’s national currency, ‘will not get anything’

Isola Moses | ConsumerConnect

The Central Bank of Nigeria (CBN) says the banking sector regulator has discovered invalid foreign overdue claims totalling $2.4 billion, which have pressured the Naira for long and spooked the country’s currency market.

Dr. Olayemi Cardoso, Governor of CBN, who disclosed this development Monday, February 5, 2024, while featuring on an Arise TV programme monitored in Lagos, said the Consultant to the Bankers’ Bank made the discovery after an audit, unveiling several shady Forex deals in the process.

US Dollars and Nigerian Naira notes

ConsumerConnect reports Cardoso affirmed the Bank hired Deloitte to investigate the Forex claims to get a true picture of things in the Foreign Exchange market in Nigeria.

It is equally noted that after seven years of being concealed from public knowledge, the CBN published its audited accounts 2023 during which the auditors revealed a $7 billion backlog of unmet Dollar demand from investors and currency users.

The development is said to have created an overhang in the Forex market which, unless cleared, could keep the national currency pressured, leaving the Naira on a continued free fall against the United States (US) Dollars.

What report of Deloitte’s investigation reveals, by Cardoso

Dr. Cardoso also explained the Deloitte report uncovered that as much as $2.4 billion of the said Forex backlog are “false claims”, with claimers unable to present required import documents in some instances.

The CBN Chief stated: “We had had reasons to believe we needed to take a harder look at these obligations.

“So, we contracted Deloitte management consultants to do forensics of all these obligations, and to actually tell us what was valid and what was not.”

He further said: “The result that came out of this was startling in a great respect. It was startling.

“We discovered that of the roughly $7 billion, about $2.4 billion had issues, which we believe had no business being there and the infractions on that ranged from so many things, for example not having valid import documents and in some cases, entities that do not exist.”

He as well noted that “there were account parties who had asked for Foreign Exchange and got more than they asked for. “There were some who didn’t even ask for any and got. So there were whole loads of infractions there.”

Nigeria’s Naira has been on a much-prolonged retreat, dating back to the pandemic days, against the Dollar as a heap of unmet obligations to investors and exporters continues to strain the currency, which has weakened to a dross, Premium Times report also said.

The report noted that Naira finished 2023 as the world’s worst-performing currency, weighed down by illiquidity and commonplace speculative practices among market operators and street traders.

Currency users are having to throng the parallel market, where the exchange rate is higher but the dollar is in greater supply, to have their needs met.

However, President Bola Ahmed Tinubu, shortly after his inauguration May 29, 2023, moved to liberalise the Foreign Exchange system hitherto bogged down by an unorthodox regime that pegged the exchange rate rather than allowing the Naira to trade freely and find price discovery.

The CBN collapsed the multiple Naira exchange rates, adopted under the immediate past CBN governor, Godwin Emefiele, into a single window as part of a slew of currency reforms that followed.

The CBN also initiated its first devaluation round under the current administration around mid-June last year.

Those market-friendly moves were aimed at courting international investors but they are hurting Nigerians at home, considering that they are adding fuel to an already elevated inflation by making imported goods and raw materials much more expensive, report said.

More so, last week, Naira’s official rate reportedly nosedived by over 36 per cent, dropping to a lower level than the street rate, after the CBN overhauled its approach to setting the rate in the official market and came hard on Forex traders involved in misguiding the public with inaccurate prices and reporting of market activities.

Incidentally between May 2023 and now, the Naira has depreciated by approximately 68 percent, 50 percent in 2023 alone, according to report.

The banking sector, regulator, however, accused Deposit Money Banks (DMBs), which it fingered in the speculative activities that are pressuring the Naira in the Nigerian economy.

Cardoso recently directed the DMBs to offload Forex reserves and increase Dollar supply to the market by ensuring their Foreign Exchange Net Open Position (NOP) does not exceed 20 percent of shareholders’ funds unimpeded by losses.

Going forward, Dr. Cardoso said in the interview that those making invalid claims of $2.4 billion just uncovered would not get anything.

He averred: “As they were identified, we wrote to the authorised dealers to come in and explain what the situation was. Sadly, quite frankly, much of those has not been disputed to our satisfaction.”

According to him, the CBN has settled requests in the neighbourhood of $2.3 billion, including those from foreign airlines operating in the country. That leaves the balance of the genuine arrears of dollar demand at $2.2 billion, stated he.

Assuring Nigerian consumers of financial products and services of more liquidity in the Forex market, Cardoso noted that the remainder would be cleared very shortly.

He said: “I think we are at the end of this, to put it that way.”

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