CBN uncovers $2.4bn questionable FX transactions

•Says we inherited $7bn FX backlog

By Mariam Abeeb and Joy Baba-Yesufu

Olayemi Cardoso, governor of the Central Bank of Nigeria (CBN), says several infractions were discovered in about $2.4 billion foreign exchange (FX) transactions.
Cardoso spoke during an interview on Arise TV monitored by Peoples Daily yesterday.
Th governor, said a forensic audit of the bank’s $7 billion FX backlog by Deloitte Management Consultant, revealed that $2.4 billion of the transactions was invalid.
Cardoso said some of the infractions include a lack of valid import documents, and transactions involving nonexistent entities.
“We contracted Deloitte Management Consultant to do a forensic of all these obligations and to tell us what was valid and what was not. Of course, we were committed to ensuring that we would pay all valid transactions,” he said.
“The result that came out of this was startling in great respect; it was quite startling. We discovered that of the roughly $7 billion, about $2.4 had issues, which we believed had no business being there – and the infractions from that range from so many things.
“For example, not having valid import documents and in some cases, even entities that did not exist and in some cases, beneficiaries and account parties that asked for FX and got more than they asked for. And those who didn’t even ask for any and got.
“So, there was a whole load of infractions there, which I said amounted to about $2.4 billion out of the $7 billion headline figure.”
According to the governor, the apex bank has successfully settled legitimate FX requests totalling $2.3 billion, leaving an outstanding obligation of approximately $2.2 billion.
Cardoso’s revelation comes amid the implementation of critical policies by the apex bank aimed stabilising Nigeria’s FX market which has continued to fluctuate in the past week.
WE INHERITED $7 BILLION FX BACKLOG’
Providing updates on the backlog liabilities, Cardoso said his leadership inherited the $7 billion debt, noting the central bank discovered that $2.4 billion of the sum was invalid following an enquiry into the transactions.
He assured Nigerians that the FX backlog issue would soon come to an end as only about $2.2 billion currently remains unpaid.
“When we came into the leadership of the Central Bank a few months ago, the issue of foreign exchange backlog was something that we met — obviously for something that had been accumulated over a period of time. It is very important as a sovereign nation to be able to keep your integrity intact, and as a bank, to be able to show that we consider obligations as obligations that must be met,” Cardoso said.
“Now, approximately $7 billion was what we were told, and we looked at these and commenced the process of starting to pay.
The CBN governor said if they are confirmed, the immediate plan to stablise the naira would be for the apex bank to settle some financial obligations and make “transparent rules”.
“Number one is what I will term an ‘operational issue’. Right now we have a situation where – we are aware that there are unsettled obligations by the CBN,” Cardoso said.
“Whether it is 4 billion, 5 billion or 7 billion I don’t know but definitely the immediate priority will be to verify the authenticity and extent of what is owed.
Number two, apart from the operational there is one that is system related that involves ensuring that we come up with rules that are open, transparent that any of the players in that area understands.
“We can expect foreign investors, portfolio investors – we can’t expect them if there is no open transparent system that everyone understands.
“In setting up those guidelines one will carry the relevant stakeholders along and the comment was made earlier that one should be ready to engage everybody and hear views.
“With those two things, though they may seem simple, will go a long way to ease up the restrictions we are having on people that want to come in.”