Central Bank of Nigeria (CBN) uncovered invalid foreign overdue claims totalling $2.4 billion, which have pressured the naira for long and spooked the currency market, Olayemi Cardoso, governor, Central Bank, said on Monday.

Olayemi Cardoso, governor, Central Bank,

Cardoso said the discovery was made after an audit by the consultant that the Central Bank engaged brought several shady deals to light.

After seven years of being concealed from public knowledge, the audited accounts of the CBN became public last year during which auditors revealed a $7 billion backlog of unmet dollar demand from investors and currency users.

That has created an overhang in the market which, unless cleared, could keep the naira pressured, leaving the currency on a continued free fall against the dollar.

The CBN hired Deloitte to investigate the forex claims to get a true picture of things,

Cardoso said during an interview with local TV Arise, broadcast Monday morning.

The Deloitte report found that as much as $2.4 billion of the said backlog are false claims, with claimers unable to present import documents in some instances, he said

“We had had reasons to believe we needed to take a harder look at these obligations. So we contracted Deloitte management consultants to do forensics of all these obligations and to actually tell us what was valid and what was not,” Cardoso said.

“The result that came out of this was startling in a great respect. It was startling. We discovered that of the roughly $7 billion, about $2.4 billion had issues, which we believe had no business being there and the infractions on that ranged from so many things, for example not having valid import documents and in some cases, entities that do not exist.

“There were account parties who had asked for foreign exchange and got more than they asked for. There were some who didn’t even ask for any and got. So there were whole loads of infractions there,” he added.

Nigeria’s naira has been on a much-prolonged retreat, dating back to the pandemic days, against the dollar as a heap of unmet obligations to investors and exporters continues to strain the currency, which has weakened to a dross.

Naira finished 2023 as the world’s worst-performing currency, weighed down by illiquidity and commonplace speculative practices among market operators and street traders.

Currency users are having to throng the parallel market, where the exchange rate is higher but the dollar is in greater supply, to have their needs met.

President Bola Tinubu set out shortly after his inauguration last year to liberalise the foreign exchange system, which has been bogged down by an unorthodox regime that pegged the exchange rate rather than allowing the naira to trade freely and find price discovery.

The CBN collapsed the multiple naira exchange rates, adopted under the immediate past CBN governor, Godwin Emefiele, into a single window as part of a slew of currency reforms that followed. It went further to initiate its first devaluation round under the current administration around mid-June.

Those market-friendly moves were aimed at courting international investors but they are hurting Nigerians at home, considering that they are adding fuel to an already elevated inflation by making imported goods and raw materials much more expensive.

In the week that just went by, naira’s official rate dived by over 36 per cent, dropping to a lower level than the street rate, after the CBN overhauled its approach to setting the rate in the official market and came hard on traders involved in misguiding the public with distorted prices.

Between the point Mr Tinubu took office and now, the naira has depreciated by approximately 68 per cent, 50 per cent in 2023 alone.

But banks also have been fingered in the speculative activities that are pressuring the naira.

Cardoso gave a tall order to banks at the end of January, ordering them to increase dollar supply to the market by ensuring their foreign exchange net open position does not exceed 20 per cent of shareholders’ funds unimpeded by losses.

Put differently, the gross amount of loans lenders can grant in foreign currency must not exceed one-fifth of their shareholders’ funds, which could force banks to make the remaining cash available to the market, a push that could boost liquidity in the system.

Cardoso said at the interview that those making invalid claims of $2.4 billion would not get anything.

“As they were identified, we wrote to the authorised dealers to come in and explain what the situation was. Sadly, quite frankly, much of those has not been disputed to our satisfaction.”

So far, the apex bank has settled requests in the neighbourhood of $2.3 billion including those from airlines operating in the country, he went further to say. That leaves the balance of the genuine arrears of dollar demand at $2.2 billion.

Cardoso assured that the remainder will be cleared very shortly.

“I think we are at the end of this, to put it that way,” he said.

Last month, Wale Edun, the Minister of Finance and Coordinating Minister of the Economy, told Bloomberg the government had opened talks with the World Bank with a view to securing a lifeline of between $1 billion and $1.5 billion from the World Bank to rescue the naira.