Analysts on Tuesday, commended the recent intervention of the Governor of the Central bank of Nigeria (CBN), Mr. Olayemi Cardoso in clearing the air about the foreign exchange obligations of the federal government.
The CBN governor in an interview Monday with Arise Television, set the records straight about the actual FX commitments of government contrary to speculations.
Before now, it was reported that the federal government’s total FX liabilities ranged in the region of between $7 billion and $10 billion, a figure which had been disputed for long and finally laid to rest by the CBN.
Cardoso, who addressed various issues and efforts by the CBN to reposition the economy, had clarified that following a forensic audit commissioned by the bank, it was discovered that $2.4 billion out of the acclaimed $7 billion outstanding foreign exchange liabilities of the federal government were not valid for settlement.
The CBN governor also stated that the bank had settled verified FX requests which amounted to $2.3 billion adding that current total outstanding FX obligations remained at $2.2 billion. This was a far-cry to the headline FX backlog claims.
He also explained the policy direction of the apex bank in terms of the various reform initiatives to correct the imperfections in the FX market and stabilise the Naira.
Cardoso, who further indicated that part of the headline $7 billion outstanding FX claims was fraudulent, referred to the outcome of a forensic audit by Deloitte Management Consultant which was commissioned by the apex bank.
Analysts who spoke in separate interviews said the central bank governor’s clarification will boost investor confidence in the economy.
They said Cardoso’s clarifications have shown the bank’s policy direction going forward.
Managing Director/Chief Executive, Dignity Finance and Investment Limited, Dr. Chijioke Ekechukwu, said the governor’s “comments have clarified certain hazy issues, thereby enhancing investors’ confidence”.
He said, “Mentioning the outstanding amount owed creditors gives investors’ confidence and hope. The interview clarified a good number of sketchy issues. And he was clear to state that they were going to concentrate on stabilising prices and reducing inflation.”
Wealth Management and Business Development Consultant, Mr. Ibrahim Shelleng, said Nigerians and foreign investors will be buoyed by Cardoso’s utterances.
He said, “Undoubtedly, the FX situation has been a major concern to the Nigerian economy, given its rapid devaluation in recent times.
“Foreign portfolio investors who may have hitherto shied away from investing in Nigerian securities may be more encouraged to do so now.
“The much-highlighted backlog of FX demand has hopefully been deconstructed to provide a more positive outlook.”
Shelleng said, “With the greatly reduced backlog figures touted, it is surely more palatable. It’s easier to see how the government can resolve it, especially given the anticipated return of FPIs.
“However, it remains to be seen if there will be increased activities in our equities and bond markets. What is likely is that sovereign bond yields are likely to increase to attract more FPI.”
On his part, Managing Director/Chief Executive, SD&D Capital Management Limited, Mr. Idakolo Gbolade, said the interview laid out the policy framework of Cardoso’s administration.
He said, “The new management of CBN met a challenging situation in the bank and it will take bold and calculated measures to return the CBN back to its traditional position.
“The new policies taken so far are aimed at helping the Naira to find its level and stop the profiteering of banks as regards our FX situation.
“The willing buyer and willing seller policy for forex is a policy that will eventually strengthen and stabilise the Naira and the economy at large once the other policy measures start yielding fruit.”
Idakolo, particularly expressed satisfaction with the central bank’s plan to streamline Bureau de Change operators are a critical stakeholder that could determine the success of the apex bank policy reforms.
He said, “There is need to adequately monitor BDCS activity and ensure they are sourcing FX from CBN.
The traditional role of the CBN which includes implementation of monetary policies and financial sector supervision needs to be improved and appropriate sanctions meted to offenders of laid down guidelines.
“The new CBN team is on the right track if they can ensure stringent implementation of their policies.”