CBN to Inject $10 Billion into Forex Market, Clearing Backlogs for International Students, Importers, and More

In a bid to alleviate the persistent scarcity of foreign exchange (forex) in Nigeria, the Central Bank of Nigeria (CBN) has announced its intention to inject a substantial $10 billion into the forex market over the next two weeks. This significant move comes as a response to the ongoing challenges faced by individuals and businesses in accessing forex, with various sectors being affected.

The Acting Governor of the CBN, Folashodun Shonubi, disclosed this plan during a recent announcement in Lagos. Shonubi revealed that the CBN will collaborate with Nigerian deposit money banks (DMBs) to distribute the forex infusion efficiently. Considering that CBN controls approximately 75 percent of forex transactions, it is expected to play a pivotal role in clearing the existing forex backlogs.

These backlogs encompass a wide range of needs within the foreign exchange market, including requests from businesses, educational institutions, and individuals. The backlog has persisted due to factors such as a decline in Foreign Direct Investments (FDIs), reduced Foreign Portfolio Investments (FPIs) inflows, and diminished international reserves.

Among the beneficiaries of this substantial forex injection are manufacturers and importers who require forex for raw material inputs. Additionally, individuals seeking forex for purposes such as paying international school fees, covering medical bills abroad, and accessing Business Travel Allowances (BTAs) and Personal Travel Allowances (PTAs) will benefit from this initiative.

Explaining the rationale behind the forex backlog, Shonubi stated, “There is a large amount of obligations that the banks in Nigeria have already taken on. So, what happened was that at maturity, they actually make the foreign exchange available for those who needed to use them like importers and what have you. There are some customers who still have their obligations, and part of the restructuring with the banks in Nigeria is also to clear that backlog. That is something we have been discussing for a while. I expect that we will do that within the next one or two weeks.”

He emphasized that this move by the CBN is intended to ensure that these longstanding obligations are not left unaddressed. Furthermore, it is expected to stabilize the forex market and reduce CBN’s regular involvement in forex transactions. Shonubi added, “There is so much more foreign exchange that people don’t talk about, that is being made available through the banking system and banks are selling to their customers. It doesn’t come to the Central Bank, it doesn’t appear as part of the demand that comes to us. And it is significant. It is almost three times what we as a Central Bank make available.”

This significant injection of forex into the Nigerian market is a proactive step by CBN to address the persistent forex scarcity and meet the diverse needs of businesses and individuals across various sectors. It is expected that this move will have a positive impact on the Nigerian economy and provide much-needed relief to those facing forex-related challenges.

Source: Ripples Nigeria

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