FG urged to resolve unattended $2.4bn FX forward contracts as businesses crack under pressure

In March, the Central Bank of Nigeria (CBN) invited law enforcers to investigate foreign exchange forward claims worth $2.4 billion.

However, since then, the Manufacturers Association of Nigeria (MAN) has continuously urged the apex bank to follow through with it.

The situation is affecting many businesses across Nigeria. Segun Ajayi-Kadir, who leads the Manufacturers Association of Nigeria (MAN), said that the CBN still hasn’t cleared $2.4 billion worth of forward contracts, putting severe strain on manufacturers as commercial banks continue to charge dollar accounts along with other Naira bank charges such as 35 per cent interest rate on their facilities.

According to both MAN and the Nigerian Association of Chambers of Commerce Industry Mines and Agriculture (NACCIMA), many businesses took bank loans as working capital, expecting to receive the foreign exchange that the CBN had promised them. MAN calls this a “worrisome breach of contract” that has increased currency risks for businesses, causing major financial losses and disrupting operations.

A Nigerian businessman, Abdullahi Abiola, who imports printing materials, said his business is struggling with high interest rates because the Central Bank of Nigeria (CBN) hasn’t fulfilled its foreign exchange contracts for over a year since President Bola Tinubu took office. He’s now paying extremely high interest rates of 35 per cent to banks.

Abiola said he has had to close parts of his business and reduce his workforce. In his words: “Interest rates paid to banks have eaten all my profits and threatened my capital. The situation has been compounded by unprecedented energy costs, which have quadrupled in the last year.”

He’s now asking the CBN to fulfil these overdue foreign exchange contracts to help prevent businesses from failing, which could lead to more job losses. He has also called on President Tinubu and Finance Minister Wale Edun to step in and help manufacturers who are struggling with this problem.

Abiola describes his situation clearly: “Businesses with substantial foreign exchange liabilities like my own are seriously challenged because of my company’s inability to fulfil the offshore obligations due to the CBN’s non-delivery of dollars.” He concludes that he is currently dealing with severe credit and liquidity risks from these unfulfilled contracts, which have damaged his cash flow and threatened his company’s financial stability.