Following the Central Bank of Nigeria’s (CBN) default on clearing foreign ex­change (FX) backlog as promised, analysts on Monday said such action is undermin­ing investor confidence that the President Bola Ahmed Tinubu’s government is try­ing to recreate.

To this end, they said, those expecting the Central Bank of Nigeria (CBN) with the support of banks to begin payment of the backlogs of foreign exchange (FX), this week, may have to wait a little longer.

This is because sources privy to the plan to clear the backlog said there is no green light yet for the clearance to come to effect.

It would be recalled that the CBN on September 5 announced plans to clear the foreign exchange back­logs in two weeks.

The move to address the pay­ment of the backlog, according to the acting CBN governor, Fo­lashodun Shonubi, is aimed at restoring investor confidence in the Nigerian economy, especially, foreign investors.

He said, “We have been working at the central bank with commer­cial banks on various structures to clear it. There’s a large amount of the obligations that the banks in Nigeria have already taken off.

“So what happened was at that maturity, they made the foreign exchange available for those who needed to use it, the importers and what have you. So we are dis­cussing with them so that we can restructure their own.

“Some customers who still have their obligations with their banks are being addressed by the banks and our structure with the banks in Nigeria was to clear that backlog. It is something we’ve been discussing for a while and we ex­pect that we will clear it within the next one or two weeks”.

The CBN has been grappling with an unsettled foreign exchange backlog owed local businesses in the last few years and this is hurt­ing investors’ confidence and it will set the pace for the new reform in the market.

The apex bank used to sell about $200 million in FX forward contracts every two weeks but soon ran into troubled waters as dollar inflows dried up and a dollar demand backlog swelled.

Nigerian businesses from man­ufacturers to importers, who have been on a long queue for dollars, are not the only ones worried about the backlog, which is also undermining foreign investor confidence in the CBN’s move to float the naira last month.

Foreign investors, whose par­ticipation in the FX market could make or mar the CBN’s latest reform, are wondering why the apex bank is not able to tap its $34 billion external reserves to settle the contracts.

A currency forward is a bind­ing contract in the foreign ex­change market that locks in the exchange rate for the purchase or sale of a currency on a future date. A currency forward is essentially a customisable hedging tool.

Over the last few weeks, market sources told Daily Independent that the CBN is making efforts at clear­ing the backlog because the bank believes this is a major priority of Nigeria’s new administration but the pace of settling the backlog has been too slow for comfort.

A year ago in August 2022, the CBN released $265 million out of the total $464 million trapped funds to foreign airlines leaving a balance of $199 million to clear the backlog.

According to the CBN, the funds will enable the airlines to settle outstanding ticket sales. A breakdown of the figure indicates that the sum of $230 million was re­leased as a special FX intervention while another sum of $35 million was released through a Retail Sec­ondary Market Intervention Sales (SMIS) auction.

However, the reforms have yet to fully achieve their aim of attract­ing foreign investors back to the market, causing rates to fluctuate.

The naira on Monday weak­ened to an all-time low of N960 fol­lowing strong demand for dollars at the parallel market, also known as the black market.

This represents 0.52 percent loss over N955 per dollar traded on Friday.

The naira depreciation contin­ued even after President Bola Tinu­bu appointed Olayemi Michael Cardoso as the new governor of the CBN on Friday.

At the Investors’ and Exporters’ (I&E) forex window, Nigeria’s offi­cial FX market, the naira strength­ened by 2.96 percent as the dollar was quoted at N756.91 on Friday compared to N780.00 on Thursday, slightly weaker than N758.12 on Wednesday and N742.10/$1 men­tioned on Tuesday, data from the FMDQ indicated.

The foreign exchange (FX) market turnover declined by 34.21 percent to $45.88 million on Friday from $69.74 million recorded on Thursday.

A stable exchange rate, infla­tion rate and single-digit interest rate are being highlighted as the topmost priority for Cardoso.

Investigation by Daily Inde­pendent revealed that the backlog which is put at about $10 billion may have to wait probably till when the newly nominated gov­ernor of the apex bank, Olayemi Cardoso, resumes.

A source told Daily Independent on Sunday that there was no effort towards clearing the backlog and that the CBN should be able to say what they have done.

“I can assure you that the plan to begin the payment of the back­log will not begin as expected. The appointment of the new governor is one reason to stay action”, the source said.

One of the reasons for the inabil­ity of the CBN to address this lin­gering issue is that Nigeria’s forex market is seeing a dollar shortage despite reforms and this is seen as a worrisome development.

Oluyemi Emmanuel, an an­alyst with MM & Associates, said the presidency must have requested a stay of action since a new governor will take over soon at the CBN.

“If you look at the sequence, you will notice that a higher au­thority has lost confidence in the leadership of the bank to carry out such an important move.

“I think this will be done by the new governor when he resumes”.

To Cyril Ampka, an Abu­ja-based economist, the inability to resume payment of the back­log may be due to the dwindling fortune of the economy.

He said, “The economy is not strong enough for the CBN to pay the backlog which is variously put at$2billion,$5billionand $10billion.

“The external reserves have not witnessed any significant ac­cretion in recent times. It’s been depleting and as a result, no sig­nificant payment could be made.

“The right thing is for the bank to tread carefully because the payment of this backlog may not necessarily have a significant positive impact in the foreign ex­change market”.