Governor of Central Bank of Nigeria (CBN), Mr. Olayemi Cardoso has revealed that under the past administration of the bank, entities that did not ask (nonentities) for foreign exchange (FX) got allocations while entities who asked for FX got more than they asked.
He also said the bank uncovered invalid FX overdue claims totalling $2.4 billion, which have pressured the naira for long and spooked the currency market.
Speaking during an interview with local TV Arise, broadcast Monday morning,
Cardoso said the CBN hired Deloitte to investigate the forex claims to get a true picture of things,
The Deloitte report found that as much as $2.4 billion of FX backlog were false claims, with claimers unable to present import documents in some instances, he said.
According to him, with $2.3billion settled, the valid outstanding verified FX contracts to be cleared by the CBN are $2.2billion. He said the CBN under his watch inherited the backlogs and was committed to clearing them soon.
“We had had reasons to believe we needed to take a harder look at these obligations. So we contracted Deloitte management consultants to do forensics of all these obligations and to actually tell us what was valid and what was not,” Mr Cardoso said.
“The result that came out of this was startling in a great respect. It was startling. We discovered that of the roughly $7 billion, about $2.4 billion had issues, which we believe had no business being there and the infractions on that ranged from so many things, for example not having valid import documents and in some cases, entities that do not exist.
“There were account parties who had asked for foreign exchange and got more than they asked for. There were some who didn’t even ask for any and got. So there were whole loads of infractions there,” he added.
According to him, with the ongoing reforms in the foreign exchange market, the difference between the official and parallel market is minimal and serves as a disincentive to arbitrage.
He added that the focus was to ensure that volatility is reduced, and transparency is entrenched in the foreign exchange market
On the recent directives on International Money Transfer Operators (IMTOs) , he stressed that the emphasis is on bringing more transactions through the formal market which is important for the foreign exchange market.
He maintained that the Nigerian currency, the “Naira”, was undervalued due to panic and reiterated that there was no truth in the news that the CBN was planning to convert the domiciliary account of Nigerians to naira.
Speaking ahead of his first monetary policy committee meeting scheduled for February 26th and 27th, 2024 he said, “The Transmission between the MPC meeting and money market was questionable. The CBN wants to position the MPC to be impactful on the economy, through the right signaling.”
CBN, according to Cardoso, does not produce FX, it rather relies on what comes in and that the country needs a mix of FX sources to have adequate liquidity.
He said Foreign Portfolio Investors (FPI) is one of them, stressing that lot of FPIs are very interested in coming back to the Nigerian market.
“The time for panic and cynicism is not now. We are in a time where the right decisions are being taken. Even the rating agencies are reacting positively to what is happening, “ he stated.
On CBN interventions, Cardoso agreed that they are necessary in the country because they help to channel resources to people however small, but it is important to ensure that the framework is there to ensure it gets to those who really need it.
“The CBN will focus on its core strength. We will be working closely with those whose core strength is in the intervention space. We cannot think and implement at the same time.
We do not have the luxury of failed interventions, ”he stated.
