"CBN to clear $10 billion FX backlog in 2 weeks, accuse BDCs of round-tripping"

" CBN to clear $10 billion FX backlog in 2 weeks, accuse BDCs of round-tripping \r\nThe Central Bank has said that it is working with the commercial banks to clear the $10 billion foreign exchange backlog within the next 2 weeks.\r\n\r\nAccording to reports, this was made known by the acting Governor of the CBN, Folashodun Shonubi, who broke the news at a forum on Tuesday in Lagos, when he was confronted with questions on the lingering challenges in the foreign exchange market.\r\n\r\nShonubi\u202fsaid the backlogs would be cleared through different structures within the forex market, adding that banks, which control 75% of the forex transactions, will play a significant role in seeing that the backlog is cleared.\r\n $10 billion unmet FX demand \r\nThe FX backlogs, which is the unmet demand for forex by investors and exporters, are estimated at $10 billion and have resulted in heavy losses to many firms.\r\n\r\nThese forex backlogs include dollar requests from manufacturers and importers purchasing raw material inputs from abroad, parents paying their children\u2019s tuition fees abroad, Nigerians paying medical bills abroad, travellers sourcing Business Travel Allowances (BTAs)\u202fand Personal Travel Allowances (PTA), among others.\r\n\r\nThese requests were stalled for years due to dollar scarcity, a drop in foreign direct investments (FDIs) and foreign portfolio investments (FPIs) inflows, drop in foreign reserves positions amongst other offshore investment opportunities.\r\n What the acting CBN Governor is saying \r\nShonubi said the local banks have been working with the apex bank on various structures to clear it.\r\n\r\nHe said, \u201cAs a matter of fact, there is a large amount of the obligations that the banks in Nigeria have already taken on. So, what happened was that at maturity, they made the foreign exchange available for those who needed to use them like importers and what have you. \r\n\r\n \u201cThere are some customers who still have their obligations and part of the restructuring with the banks in Nigeria, is also to clear that backlog. That is something we have been discussing for a while. I expect that we will do that, within the next one or two weeks. \r\n\r\n \u201cWhat that means, therefore, is that this obligation that people keep on talking about will not be left. Today, we still intervene in the market, so it is not as if it has affected our ability to make monies available to banks in the Investors and Exporters foreign exchange market,\u201d \r\n CBN contributes less than 25% of the FX market \r\nHe explained that considering the volume of forex interventions, the role and the depth of the CBN intervention is overemphasized.\r\n\r\nShonubi said, \u201cWhen we look at the volumes, the Central Bank of Nigeria today contributes less than 25% into the forex market. And the aim if you remember about a year and a half ago, was that the Central Bank did not want to be a regular player, but more of intervening to stabilize the rates and that is where we are going.\u2019\u2019 \r\n\r\nHe added that a lot\u202fof forex transactions go on through the commercial banks without the CBN\u2019s input.\r\n\r\nHe said, \u201cThere is so much more foreign exchange that people don\u2019t talk about, that is being made available through the banking system and banks are selling to their customers. It doesn\u2019t come to the Central Bank, it doesn\u2019t appear as part of the demand that comes to us. And it is significant. It is almost three times what we as a Central Bank make available.\u2019\u2019 \r\n Accuses BDCs of round- tripping. \r\nShonubi also spoke on the need to modernize Bureau de Change (BDC) operations,\u202fchallenging operators to be technology-compliant or lose their licenses.\r\n\r\nThe CBN boss stated that plans are on to close down Bureau De Change, BDC which does not operate electronically.\r\n\r\nHe said the current BDC market is largely cash-driven, and\u202f\u202fthe apex bank plans to modernize its operations to reduce cash interactions.\r\n\r\nAccusing BDCs of round-tripping, Shonubi said the BDCs were created to sell small-value forex transactions,\u202fbut the operators abandoned that role.\r\n\r\nHe said, \u201cThe BDC instead of playing its primary role; the foreign currency they get they take them to the black market. We would soon close down any BDC that does not operate electronically. Forex market is supposed to be seamless and transparently carried out. Even when they get the dollars that are available, they would rather keep it and sell in the black market.\u2019\u2019 \r\n \r\n \r\n "

"CBN to clear $10 billion FX backlog in 2 weeks, accuse BDCs of round-tripping"

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