CBN verifying disputed $2.4bn FX claims – Cardoso

The Central Bank of Nigeria (CBN) is currently verifying disputed foreign exchange claims amounting to $2.4 billion, according to the bank’s newly appointed Governor, Dr. Olayemi Cardoso. The claims, which have sparked concerns over transparency and accountability in the nation’s foreign exchange market, are part of the ongoing efforts to address long-standing issues within the financial system and to restore confidence in the country’s currency management.

Dr. Cardoso made this announcement during a recent media briefing, where he outlined the CBN’s plan to investigate these claims thoroughly and resolve any discrepancies. The verification process, which involves scrutinizing the authenticity of these claims, aims to ensure that all transactions in Nigeria’s foreign exchange market adhere to the required standards and that any irregularities are addressed.

These foreign exchange claims have been a source of contention between the CBN and various financial institutions, prompting the bank’s leadership to take decisive steps in order to clarify the situation and ensure that any outstanding issues are resolved.

### Nature of the Disputed Claims

The disputed $2.4 billion in foreign exchange claims stems from past transactions in Nigeria’s highly regulated and monitored FX market. Over the years, Nigeria has faced significant challenges in managing its foreign exchange reserves, exacerbated by a shortage of foreign currency, volatile oil prices, and a reliance on imported goods. These pressures have often led to discrepancies between reported transactions and actual funds in the market.

Governor Cardoso explained that the disputed claims represent transactions that require further investigation to determine their validity. “We are committed to addressing the issues around these claims transparently, and we will ensure that any irregularities are identified and rectified in line with best practices,” Cardoso said. He stressed that the ongoing review would be conducted in a fair and impartial manner, with a view to protecting the integrity of the CBN and the country’s financial system.

The claims are believed to involve foreign exchange allocations made to banks and other authorized dealers in the past, as well as unresolved claims related to foreign currency transactions. These could include outstanding letters of credit, unfulfilled forward contracts, and other FX transactions that have been flagged for further scrutiny.

### Restoring Confidence in the FX Market

The CBN’s decision to verify these foreign exchange claims is part of a broader effort to restore transparency and confidence in Nigeria’s FX market, which has been plagued by a lack of liquidity, widening exchange rate differentials between the official and parallel markets, and concerns about transparency in the allocation of foreign exchange.

Governor Cardoso has emphasized that his administration is focused on reforming the foreign exchange system, ensuring that the market operates in a more transparent and efficient manner. The verification of the $2.4 billion claims is seen as a crucial step in that process, as it will help to clarify the true state of Nigeria’s foreign exchange obligations and reduce the opacity that has surrounded some transactions in recent years.

“We understand that restoring confidence in the FX market is essential for stabilizing the naira and boosting investor confidence in the Nigerian economy,” Cardoso stated. “By thoroughly investigating these disputed claims, we are taking a firm stand against any practices that may have undermined the integrity of our financial system.”

### Addressing FX Market Challenges

Nigeria’s foreign exchange market has faced considerable challenges in recent years, driven by external and internal factors. The global oil price volatility, which affects the country’s foreign exchange reserves, combined with the removal of fuel subsidies and rising inflation, has created significant pressure on the naira. As a result, Nigeria’s foreign exchange market has struggled with liquidity issues, making it difficult for businesses to access foreign currency for imports and other transactions.

Additionally, the gap between the official exchange rate and the parallel market rate has widened, leading to concerns about the efficiency and fairness of FX allocation. Businesses and individuals have increasingly turned to the parallel market to source dollars at much higher rates, further complicating the CBN’s efforts to stabilize the naira.

To address these challenges, Governor Cardoso has outlined several reforms aimed at improving the supply of foreign exchange, unifying the exchange rates, and ensuring that the FX market operates more smoothly. Part of these reforms involves a review of historical FX transactions and resolving any outstanding disputes, such as the $2.4 billion claims currently under investigation.

### Potential Implications

The verification of these disputed claims could have significant implications for Nigeria’s financial sector, depending on the findings of the CBN’s investigation. If any irregularities are uncovered, it could prompt further regulatory actions or sanctions against those found to be involved in unethical practices. On the other hand, resolving the disputed claims could help clear the backlog of unresolved FX obligations, providing greater clarity for businesses and financial institutions that have been affected by these uncertainties.

Furthermore, the verification process is likely to impact the CBN’s approach to managing future foreign exchange allocations. By tightening oversight and improving the transparency of the FX market, the CBN hopes to foster greater trust among market participants and international investors, ultimately contributing to a more stable and predictable foreign exchange environment.

### Collaboration with Financial Institutions

As part of the verification process, the CBN has called on banks and other financial institutions to cooperate fully with the investigation. Governor Cardoso emphasized that the CBN is working closely with stakeholders in the financial sector to ensure that the claims are verified quickly and fairly.

“We are engaging with the financial institutions involved, and we expect full cooperation as we work to resolve these issues,” Cardoso said. “This is not just about the CBN; it’s about ensuring the integrity of the entire financial system.”

Banks and authorized dealers have been urged to review their records and provide any necessary documentation to support the verification process. The CBN has also warned that any attempts to obstruct the investigation or conceal relevant information will be met with strict regulatory action.

### Conclusion

The CBN’s move to verify the disputed $2.4 billion in foreign exchange claims is a critical step in restoring transparency and accountability to Nigeria’s foreign exchange market. Under Governor Cardoso’s leadership, the bank is taking decisive action to address long-standing issues in the FX market and improve the overall efficiency and credibility of the financial system.

While the investigation into the disputed claims is ongoing, it signals a clear message that the CBN is committed to ensuring that all foreign exchange transactions are conducted transparently and in accordance with best practices. As the verification process unfolds, the outcome could have far-reaching consequences for Nigeria’s financial institutions, businesses, and the broader economy, especially as the country continues to navigate its economic challenges.