Forex Crisis Deepens: CBN Yet to Clear $10bn Debt, Naira Nears 1,000/$ – Despite promises made by the Central Bank of Nigeria (CBN) to clear over $10 billion in forex debts, it has yet to fulfill its commitment, causing a ripple effect across various sectors of the Nigerian economy.
Unfulfilled Promises and a Struggling Naira
On September 6, 2023, then-acting CBN Governor, Folashodun Shonubi, announced that the CBN had finalized negotiations on dollar debts with commercial banks and promised to clear all forex backlogs within one to two weeks. However, nearly three weeks later, top banking executives have revealed that the CBN has failed to honor its promise, putting banks in a precarious forex liquidity situation.
The implications have been immediate and severe. Many banks have temporarily halted various foreign exchange transactions, including those for school fees and Personal Travel Allowance. Meanwhile, the naira’s value has taken a hit, with Bureau De Change operators selling it between 990 and 995 per dollar in Lagos, Abuja, and Kano. At its worst, the naira was exchanged for as high as 1,000 per dollar, according to an Abuja-based operator.
Manufacturers and Industry Players Sound the Alarm
The situation has also triggered concerns among manufacturers and other stakeholders in the economy. Segun Kuti-George, National Vice Chairman of the Nigerian Association of Small-Scale Industrialists, warned that the cost of production is escalating due to the rising cost of imported raw materials and equipment. He fears that local products will become uncompetitive against imported ones, leading to more factory closures.
Francis Meshioye, President of the Manufacturers Association of Nigeria, echoed these concerns, stating that the current forex crisis would inevitably lead to increased product prices, making Nigerian-made products less competitive both domestically and internationally.
Analysts Call for Urgent Intervention
Dr. Aminu Gwadabe, President of the Association of Bureaux De Change Operators of Nigeria, stressed the need for legislation to improve liquidity in the forex market and enhance public confidence. He pointed out that a combination of factors, including investors’ backlog estimated at $6.8 billion and dwindling Diaspora remittances, is contributing to the forex crisis.
Dr. Muda Yusuf, Director/CEO of the Centre for The Promotion of Private Enterprise, noted that the new CBN Governor, Dr. Olayemi Cardoso, is assuming leadership at a crucial economic juncture. “There is a serious confidence crisis in the foreign exchange market,” he said, urging the CBN to clear the backlog of forex obligations as a high priority to restore investor confidence.
A Troubling Outlook
The situation has worsened dollar liquidity in the parallel market, forcing bank customers to rely on the black market to meet their forex needs. With confidence dwindling and the economy grappling with depreciating exchange rates, soaring energy costs, and ravaging inflation, the pressure is on for the CBN and the new economic team to act swiftly and decisively.
The failure to clear the $10 billion debt not only raises questions about the CBN’s credibility but also puts at risk various sectors of the economy that depend on a stable foreign exchange market. As the naira teeters on the brink of hitting 1,000 per dollar, the time for action is now.
