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The spokesperson of the Central Bank of Nigeria, CBN, Isah Abdulmumin, on Thursday, said it has started clearing outstanding foreign currency forwards owed to banks, with banking sources saying an initial payment of $1 billion had been made.
“The CBN has started paying the FX backlogs to banks. So far, 14 banks have been paid,” Isah Abdulmumin told Reuters but declined to give the amount or name the banks.
Four banking sources said the banks were paid varying amounts totalling about $1 billion and that the payments would continue in the next few weeks.
While a few of the lenders were paid the entire amount owed, others got as much as 80% of backlog, the sources said.
Nigeria has nearly $7 billion in forex forwards that have matured, which corporates bought from local banks. Banks then repaid foreign credit lines with their own funds when the central bank did not pay out.
The central bank’s payments follow Finance Minister Wale Edun’s Oct. 23 announcement that Nigeria was expecting $10 billion of inflows to improve foreign exchange market liquidity. It will come as a relief to local lenders, who have been struggling to meet demands from customers due to chronic dollar shortages in Africa’s largest economy.
“The fulfillment of obligations…will free up credit lines,” Abuja-based economic analyst Kelvin Emmanuel said. “I expect that within the next week or two, banks will be able to open letters of credit at fair value.”
New central bank governor Yemi Cardoso has said clearing the backlog was a priority but gave no timeline for how long it would take.