Nigeria’s apex bank. Image Source: CBN

Mr. Ade Shonubi, the acting governor of the Central Bank of Nigeria (CBN), told reporters at an event in Lagos that the apex bank will clear the backlog of foreign exchange (FX) demands in two weeks. 

At a press conference in Lagos on Monday, Mr. Ade Shonubi, the acting governor of the CBN, said that as a result of a partnership between local banks and the CBN, the current backlog of foreign exchange (FX) demand would be cleared in two weeks—estimated at $10 billion. “The local banks have been working with the Central Bank on various structures to clear [the backlog],” Shonubi said. 

The FX backlog refers to the foreign exchange demand by investors and importers that has not been met. Shonubi claimed that “a large amount” of foreign exchange demand has already been met by Nigerian banks, adding that the banks contribute three times more FX than the central bank. This appears to be consistent with the CBN’s recent transition from a regular player in the foreign exchange market to receding into a regulatory background. He added that the bank’s involvement in the FX market was a result of the restructuring with the banks and that the backlog would be cleared in “the next one or two weeks.”  

In recent weeks, the CBN has tried different approaches to stabilising the FX rate and clearing a backlog of demand requests for the greenback. The CBN had previously tried to use a $3 billion loan secured by the Nigerian National Petroleum Corporation to inject liquidity into the foreign exchange market but the plan fell through as investors developed cold feet, leaving the African Export-Import (Afrexim) Bank as the sole provider. 

Clearing the backlog of FX demand would boost investor confidence in Nigeria and bring stability to the FX rate, which is very important to investors. After floating the Naira, the official market rate quickly shot up from $1/₦462 to $1/₦700 and as high as ₦920 on the parallel market. If an investor took a loan at the former rate, they would have to pay back a higher amount in Naira to repay the same amount in dollars. This rapid devaluation has led to severe economic difficulties and is hitting startups that raised money in dollars hard, with some founders saying that most businesses might shut down as a result.

Shonubi also said that the backlog did not affect the CBN’s ability to make foreign currency available to banks. Regarding media reports that the CBN owed JP Morgan $7 billion, Shonubi clarified that the CBN did not have any outstanding balance with JP Morgan, calling claims of a $7 billion debt “misinformation”. 

The backlog of foreign exchange demands has reduced investor confidence in Nigeria, with rightful fears that investors might not be able to recoup any profits they make in Nigeria. With as much as $812 million in revenue stuck in Nigeria, foreign airlines have arguably been the most affected by the backlog of demands. But in recent weeks, many airlines have begun to withdraw their funds from Nigeria, a sign of the progress the CBN has made. According to the CBN, other foreign investors have also been able to repatriate over $5 billion worth of dividends from the country between October 2022 and March 2023.