Transactions from 2022 and 2023 remain unsettled upon maturity, raising concerns among analysts and stakeholders about potential economic repercussions.
Reports suggest that affected companies could face losses amounting to N2.4 trillion, which would impact Company Income Tax (CIT) for the next two to three years and strain federal government revenue.
This situation may also put immense pressure on the fragile FX market, potentially driving exchange rates to about N3,000/$, and could result in significant bank losses if SMEs and corporations fail to service confirmation lines, risking over one million jobs.
Analysts warn that the unsettled forwards could undermine investor confidence in an already struggling economy, stressing the need for swift action from the apex bank.
In March, the Central Bank of Nigeria (CBN) announced that it had settled all valid FX backlogs, fulfilling a commitment by Governor Olayemi Cardoso to address an inherited $7 billion in outstanding liabilities.
In a recent interview with Arise Television, Cardoso clarified that $2.4 billion of the $7 billion in outstanding FX liabilities were deemed invalid for settlement. He noted that while $2.3 billion in verified FX requests had been settled, $2.2 billion in obligations remained.
Cardoso cited a forensic audit by Deloitte Management Consultant, which the CBN commissioned, revealing that some claims were not valid. Consequently, the CBN has decided not to settle invalid FX requests and has informed authorized dealers of the identified discrepancies.
Additionally, Cardoso mentioned that the CBN had engaged the Economic and Financial Crimes Commission (EFCC) to investigate and prosecute fraudulent transactions.
However, affected companies are concerned about the prolonged investigation, as many have used bank-confirmed lines to open Letters of Credit (LCs), paid import duties, and received goods, while their suppliers have been settled by correspondent banks.
Stakeholders urge the CBN to resolve the forwards and allow the EFCC to prosecute any round-tripping or liquidity abuse cases. They warn that delays in settling these liabilities could have severe implications for the companies and the broader economy.
Adewale-Smatt Oyerinde, Director General of the Nigerian Employers’ Consultative Association (NECA), explained that forward transactions involve a company crediting the CBN through its bank for future FX supply, usually within 90 days.
Oyerinde expressed concern over data from JP Morgan & Co. estimating unsettled liabilities at $6.8 billion in 2022, likely higher now. He highlighted the disruption in production plans and capacity utilization, particularly for SMEs, due to unsettled CBN liabilities, resulting in lower business activity, revenue loss, and reduced profit margins.
Oyerinde urged the CBN to prioritize settling outstanding forwards to allow affected companies to continue their operations, arguing that involving the EFCC is unnecessary.
“The CBN should engage relevant banks to resolve unsettled cases rather than involving the EFCC, which was not part of the original agreement,” Oyerinde stated. “Due diligence by the CBN should suffice in determining the genuine claims.”
