Nigeria: NACCIMA Warns of Crisis as CBN Delays FX Forward Payments

Mr. Dele Oye, the National President of the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA), has raised alarms about the severe impact of the Central Bank of Nigeria’s (CBN) non-payment of Foreign Exchange (FX) forwards. He reported that many companies are facing dire financial challenges, with some on the brink of bankruptcy due to the delayed payments.

Oye highlighted that affected businesses and banks are grappling with exorbitant interest rates, averaging over 35%, which has severely damaged their reputations and strained relationships with international partners. The CBN’s failure to meet its commitments has led to erosion of trust and credibility, significantly affecting Nigeria’s financial standing globally.

In an exclusive interview with THISDAY, Oye explained that NACCIMA has been actively addressing the issue. The association has engaged in extensive advocacy, urging CBN Governor Mr. Olayemi Cardoso to reconsider the bank’s stance. There is growing concern among Nigerian corporates and SMEs that the continued non-settlement of FX forwards could have long-term detrimental effects on the economy.

FX forwards are financial instruments used by the central bank to manage foreign exchange reserves and influence exchange rates. They involve agreements to exchange a specified amount of foreign currency at a predetermined rate on a future date. These forwards, signed between 2022 and 2023, have yet to be settled, despite increasing pressure on the CBN to fulfill these obligations.

The unsettled forwards pose a risk of eroding investor confidence, potentially impacting the economy and causing losses of up to N2.4 trillion, which could affect Company Income Tax (CIT) revenue for the next few years. Earlier this year, the CBN had announced the settlement of all valid FX backlogs, fulfilling a pledge by Governor Cardoso. However, Cardoso later revealed that $2.4 billion of the claimed $7 billion in outstanding liabilities were not valid for settlement. The CBN has contracted the Economic and Financial Crimes Commission (EFCC) to investigate suspicious transactions and prosecute fraudulent activities, but the investigation’s slow progress has left companies in distress.

Oye criticized the CBN for procedural shortcomings, alleging that companies were not given a chance to respond to findings before decisions were made. He argued that the CBN’s actions violated contractual agreements and called for immediate resolution. The delay in settling the FX forwards has broader implications, including potential job losses and further economic instability.

Financial experts have urged the CBN to revisit and clear the issues surrounding the FX forward transactions to avoid litigation and damage to Nigeria’s reputation. Dr. Innocent Okwuosa, former President of the Institute of Chartered Accountants of Nigeria (ICAN), and Dr. Boniface Chizea of BIC Consultancy Services, both emphasized the importance of honoring these binding contracts to maintain investor confidence and avoid severe repercussions for the economy.

NACCIMA has made several attempts to engage with relevant authorities, including the Minister of Finance and the CBN Governor, but has yet to achieve a satisfactory resolution. The association’s ongoing efforts underscore the urgent need for a swift and effective resolution to prevent further economic damage and restore trust in Nigeria’s financial systems.