In this piece, James Emejo and Dike Onwuamaeze, write on the increasing campaign by the Organized Private Sector for the CBN to settle valid FX forward transactions to save jobs and the economy in general.
The delay by the Central Bank of Nigeria (CBN) to settle valid and mature Foreign Exchange (FX) forward transactions has continued to attract due attention from stakeholders in the real sector of the economy including manufacturers and corporates.
Analysts said apart from its potential to negatively impact companies' ability to remain in operation, the non-resolution of pending genuine forwards could further defeat efforts by President Bola Tinubu's administration to industrialise the country.
It was learnt that the forward transactions which took place between 2022 and 2023 are yet to be settled at maturity, prompting anxiety by analysts, especially as the development puts the affected companies in difficult situations and threatens economic sustainability.
Notably, companies that used bank confirmed lines to open Letters of Credit (LCs), paid import duties, and received the goods, while suppliers were mostly settled by their banks' correspondent banks are increasingly concerned over the continued delay by the apex bank to clear its forward liabilities.
The stakeholders therefore, called on the central bank to settle the forwards and get EFCC to prosecute companies involved in any act of round-tripping or abuse in the utilisation of the liquidity.
The Organized Private Sector (OPS) has warned that the continued delay in settling the outstanding liabilities of companies could see them lose about N2.4 trillion, coupled with the far-reaching implications for the companies and the economy in general.
This could expectedly impact companies' profits for the next two to three years as well as harm federal government's income, and potentially subject the Naira to undue pressure.
Moreover, these could also trigger bank losses as confirmation lines used may not be serviced by the SMEs and corporates as well as put over one million jobs at risk.
As one of the fallouts of the non-settlement of forwards, and its impact on their operations, members of the OPS have tied the implementation of the new minimum wage of N70,000 in the private sector to the settlement of FX liabilities.
The OPS, including the Manufacturers Association of Nigeria (MAN), Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Nigeria Employers' Consultative Association (NECA), Nigeria Association of Small and Medium Enterprises (NASME), and the Nigerian Association of Small Scale Industrialists (NASSI), have particularly demanded that the CBN redeemed "all validly transacted outstanding forex forwards for companies in the productive sector."
A source told THISDAY that unsettled forward transactions had been maturing and piling up since the current leadership of CBN stopped honouring the obligations.
Earlier in March, the CBN announced that all valid FX backlogs owed to various sectors of the economy had been settled, fulfilling a key pledge of the CBN Governor, Mr. Olayemi Cardoso, to process an inherited backlog of $7 billion in outstanding liabilities.
In a recent interview with Arise Television, a sister broadcast arm of THISDAY, Cardoso revealed that about $2.4 billion out of the acclaimed $7 billion outstanding foreign exchange liabilities of the federal government were not valid for settlement.
He said while the bank had settled verified FX requests which amounted to $2.3 billion at the time, the total outstanding FX obligations remained at $2.2 billion.
The central bank governor further indicated that part of the headline $7 billion outstanding FX claims were not valid, citing the outcome of a forensic audit by Deloitte Management Consultant which the apex bank commissioned.
He maintained that the CBN would not pay for FX requests that are not validly constituted, adding that the bank had written to authorised dealers to explain the disparities identified.
Furthermore, Cardoso said the bank had contracted the Economic and Financial Crimes Commission (EFCC) to investigate suspicious transactions to prosecute individuals and entities with fraudulent entries.
However, the OPS stressed that while CBN/EFCC investigation continued almost endlessly, the corporates that believed their transactions were not fraudulent are bleeding and under intense pressure from their banks and their suppliers.
The manufacturers therefore, called on the central bank to settle the forwards and get EFCC to prosecute companies involved in any act of round-tripping or abuse in the utilisation of the liquidity.
Moreover, these transactions involved largely manufacturers that have already imported inputs on the ground that the CBN would honour its obligations but are presently indebted to their foreign suppliers, a development that would threaten their future business relationships.
According to the source, all the FX forward transactions were signed off by the CBN before they were consummated. So, for the CBN to turnaround and declare them as fraudulent beats ones imagination.
According to him, the apex bank is merely creating panic in the system that would affect many private enterprises.
He said that many members of the Manufacturers Association are affected and now they could not go back to their suppliers for further importation of machineries and raw materials because of the current unfaithfulness in meeting their obligations due to the stance of the CBN.
He said that the manufacturers who are trapped in this impasse had already paid their Naira equivalent of these transactions with interests through their banks.
The issue now is that manufacturers are being punished unnecessarily because the apex bank had presumed all forward transactions that matured after Mr. Godwin Emefiele left office as governor of the CBN as fraudulent.
"Even if the current leadership of the CBN do not trust their predecessor, it should look at the whole transactions holistically to be able to determine how best to resolve the issue," sources further confided in THISDAY.
Meanwhile, financial experts believed that the current unfaithfulness to settle contractual obligation would make it difficult for affected Nigerian business to access credits from abroad.
Commenting on the development, Chief Executive Officer, De-SME Facilitators Limited, Mr. Tony Chinwe, said, "The implications of not honouring the matured FX forwards obligations are numerous.
He said, "First, it will trigger loss of confidence in Nigerian financial instruments by foreign investors and suppliers.
"Secondly, it will leave in its trail sticky debts and worsen the level of toxic assets in the banks' balance sheets.
Chinwe, who was the former Group Head of SME Banking of the Fidelity Bank Plc, also stressed that this would erode the goodwill of these companies and wipe out the trade credits they enjoyed from their suppliers.
He said many of the companies may not survive it thereby plunging thousands of their employees into the already saturated labour market.
Among other things, recommended that the CBN should settle the obligations to maintain confidence and stability in the system.
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He said the federal government should "focus on stopping crude oil theft and recovering money stolen by these thieves. This is a low hanging fruit if the political will is there."
He said, "In 2022, the Chairman of the United Bank for Africa (UBA), Mr. Tony Elumelu stated that '95 per cent of crude oil is lost to theft.'
"Even if we put it conservatively at 69 per cent, it is a lot of money that can conveniently cover foreign exchange gaps in the short to medium term, while the government focuses on diversifying the economic base, and developing the petrochemical industry in particular."
Also, Director General, NASME, Mr. Eke Ubiji, said businessmen and women that approach the FX market do so with definite purposes in mind, adding that any delay would affect their businesses and lower their productivity, thus putting many workers out of job.
Also, in a recent interview with THISDAY, Managing Director/Chief Executive, Dignity Finance and Investment Limited, Dr. Chijioke Ekechukwu, urged the CBN to separate the genuine claims from suspected fraudulent transactions in the interest of the economy.
He said, "There are two sides to these claims: Firstly, CBN said they are still investigating these claims, and there may be some suspicious claims being investigated. Amongst the claims may also be very genuine claims.
"Whatever the case may be, investigation cannot be forever. The outcome of the investigation should be out by now after a reasonable time."
Ekechukwu, a former Director General, Abuja Chamber of Commerce and Industry (ACCI), also said, "I agree that business and counter-party confidence may be affected adversely.
"We do expect that the apex bank will assess the claims in their entirety and sieve the chaff from the substance in order not to affect genuine corporates from pursuing their business goals."
