- The International Monetary Fund (IMF) has asked the CBN to offset the $2.2 billion Forex backlog affecting the naira
- The organisation stated that the move will rebuild confidence in the system and the naira and the CBN
- It commended the actions of President Tinubu in removing structural barriers in the system and the economy
Pascal Oparada has over a decade of experience covering Tech, Energy, Stocks, Investments, and Economy.
The International Monetary Fund (IMF) has asked the Central Bank of Nigeria (CBN) to settle the overdue FX backlog to rebuild trust in the apex bank and the naira.
The organisation disclosed this in its recent Executive Board Post-Financing Assessment with Nigeria report.
IMF outlines the benefits of settling the FX backlog
The IMF insisted that paying the CBN's dollar obligations would rebuild confidence in the bank and the Nigerian currency.
The IMF said:
"Sharing comprehensive information on Nigeria's reserves position would facilitate a more complete assessment of the external situation."
It stated that the medium-term outlook would be improved if the authorities succeeded in developing and implementing a robust reform agenda.
Per the IMF report, headline inflation reached a 27-year-on-year high in October 2023, with food inflation accounting for 32%, reflecting fuel subsidy removal, exchange rate depreciation, and poor agricultural production.
It said the 30-day average gross internal reserves reported by the CBN declined to $33 billion in October, covering six months of imports.
IMF commends Tinubu's reforms
The IMF said President Bola Tinubu has implemented key structural reforms by removing petrol subsidies and unifying the country's exchange rate windows.
The Nation reports that the IMF said the new administration has begun well by addressing structural issues in the current situation.
"Immediately, it adopted two policy reforms that its predecessors had shied away from: fuel subsidy removal and the unification of the official exchange rates. Since then, the new CBN team has made price stability its core mandate and demonstrated this resolve by dropping its previous role in development finance. On the fiscal side, the authorities are developing an ambitious domestic revenue mobilisation agenda," it said.
It also cited the appointment of a Presidential Fiscal Policy and Tax Reforms Committee to propose raising domestic revenue to support infrastructure, health, and education investment.
According to the IMF, the government has tried to improve living standards by releasing cereals from the grain reserve, providing subsidised fertiliser, implementing a civil service wage award, and suspending VAT on diesel.
CBN settles $2,4 billion FX backlog
He said the amount is putting pressure on the naira and causing volatility in the FX market.
In an interview with Arise Television, Cardoso revealed that the bank had settled verified Forex requests amounting to $2.3 billion, adding that current outstanding obligations stood at $2.2 billion.
He indicated that part of the $7 billion outstanding claims was fraudulent, stressing that the bank commissioned a forensic audit by Deloitte and found that the amount was bogus.
Expert commends CBN's actions
The apex bank also stated that it has paid verified Forex claims to airlines and other companies.
Oyeyemi Alao, a financial expert and investment banker, said the CBN has taken severe steps to calm the volatility in the forex market, stressing that the recent devaluation of the naira has made it possible for the local currency to remain relatively stable.
"The CBN is taking the proper steps. In the last 21 days, it has issued about seven circulars that drowned the cacophony of noise in the Forex market.
It removed rate caps on Forex transactions by International Money Transfer organisations (IMTOs) and recently asked the banks to fix their exchange rates. It is the right step in the right direction."
Alao said the disparity between the parallel and official market rates is less than N32 per dollar.
CBN sends message to banks on ‘new’ dollar rates
Legit.ng reported that the Central Bank of Nigeria (CBN) has paved the way for banks to sell foreign exchange at rates they deem fit in plans to stabilise the naira.
CBN’s director of the financial markets department, Omolara Omotunde, disclosed this in a circular addressed to all authorised dealers.
Omotunde said the bank has decided to discontinue any restrictions on the sale of interbank proceeds.
PAY ATTENTION: Donate to Legit Charity on Patreon. Your support matters!