Says Commercial Banks has enough FX
CEM REPORT, FINANCE | The Central Bank of Nigeria (CBN) has taken concrete steps to expedite actions on clearing the huge backlogs of foreign exchange (FX) obligations in the next two weeks.
According to Adebisi Shonubi, Acting Governor of the CBN, the volume of FX resident in commercial banks in the country is three times what is available in the vault of the CBN.
The governor at a briefing in Lagos stated that clearing the backlog of FX obligations will increase offshore participation and boost foreign investors’ confidence in the country.
“On the backlog, the local banks have been working with the CBN on various structures to clear it. There is a large amount of the obligations that the banks in Nigeria have already taken up.
“So, what happened was that at maturity, they made the forex available for those who needed to use it like the importers. Some customers still have their obligations and part of the restructuring with the banks in Nigeria is to also clear that backlog.”
He further said that it was necessary to clear the FX backlog if the nation hopes to improve liquidity in the Nigeria Foreign Exchange Market (NIFEX) window, adding that the CBN contributes less than 25 per cent to the FX market but acts as an intervening player to stabilise rate.
“Because the CBN does not want to be a regular player but more of intervening to stabilise the rate and that is where we are going.”
“It is something we have been discussing for a while. Today we still intervene in the market, it is not as if it has affected our ability to make monies available to banks in the NIFEX market but when we look at volumes, the CBN today contributes less than 25 per cent to the FX market because the CBN does not want to be a regular player but more of intervening to stabilise the rate and that is where we are going.”
Additionally, Shonubi stated that operators of Bureau de Changes (BDCs) who refuse to switch to electronics will gradually be taken out of the system. Thus, there will be fewer frequent currency transactions.
He claimed that the new measure would make it easier to tell which BDCs the CBN regulates from those that it does not.
He declared that the CBN would crack down on businesses that work with foreign organizations to smuggle money into the nation illegally.