Amidst growing concerns over the volatility of the forex market and the depreciating value of the naira against the US dollar, the Central Bank of Nigeria (CBN) has taken a decisive step by disbursing $2bn to clear a significant portion of its $7bn backlog of matured foreign exchange obligations to Deposit Money Banks (DMBs). The delay in settling these obligations has been identified as a key factor contributing to the current forex market instability.
In addition to the payment to DMBs, foreign airlines have received $61.64 million, addressing part of the outstanding matured foreign exchange owed to them. The CBN’s Acting Director of Corporate Communications, Hakama Sidi Alia, emphasized the central bank’s commitment to resolving pending obligations and fostering a functional foreign exchange market.
Alia stated, “These payments signify the CBN’s ongoing efforts to settle all remaining valid forward transactions to alleviate the current pressure on the country’s exchange rate. It is anticipated that this initiative by the CBN should provide a considerable boost to the naira against other major world currencies and further increase investor confidence in the Nigerian economy.”
Foreign airlines operating in Nigeria have faced challenges in repatriating their ticket sales in foreign exchange, leading to a substantial backlog, which currently stands at over $700 million owed by the CBN. Nigeria tops the list of countries with blocked funds, according to the International Air Transport Association (IATA), with $792 million, followed by Egypt ($348 million), Algeria ($199 million), the AFI zone ($183 million), and Ethiopia ($128 million).
IATA had previously warned the CBN that failure to address these outstanding debts might force some foreign airlines to exit the Nigerian market. In response to the recent disbursement, Susan Akporiaye, President of the National Association of Nigerian Travel Agencies, acknowledged the progress, stating, “The old debts are being settled at the prevailing rate when tickets are sold, with the exchange rate around N400/450 to one dollar. The debt, which was originally over $800 million, has been reduced.”
She highlighted that this specific issue led to Emirates discontinuing flights into Nigeria, and the government has committed to clearing the outstanding debt at the rates prevalent during the sales period. Foreign airlines have resorted to sourcing forex at the Investors and Exporters (I&E) window to navigate the challenges posed by the accumulated debts.