The Central Bank of Nigeria (CBN) has released a further $500 million to address the growing backlog of foreign exchange (FX) liabilities in the country, particularly targeting sectors such as manufacturing, aviation, and petroleum. This move follows a recent payment of nearly $2 billion made by the CBN, aimed at settling overdue commitments across these key sectors.
A significant portion of the newly allocated funds, approximately $62 million, has been earmarked for foreign airlines operating in Nigeria. However, despite this payment, many of the airlines have voiced their dissatisfaction, stating that the amount is insufficient to address the backlog of stranded funds. Some airlines have even threatened to suspend their operations in Nigeria unless a more substantial solution is provided. The exact share of the $500 million dedicated to aviation remains unclear.
In a statement on Monday, Mrs. Hakama Sidi Ali, the Acting Director of the Corporate Communications Department at the CBN, assured that the central bank is fully committed to clearing all legitimate FX backlogs in the near future.
As of June 2023, Nigeria was leading the list of countries with the highest foreign exchange debt, owing a total of $812.2 million. The global tally for outstanding debts owed to foreign airlines stood at about $2.3 billion.
The aviation sector, in particular, has faced significant challenges due to the inability of airlines to repatriate their earnings from ticket sales in Nigeria. Emirates Airlines, for example, suspended flights to Nigeria in November 2023, citing the inability to access its $85 million revenue trapped in the country. This was not the first instance of the airline halting operations over similar concerns; it had previously suspended flights in August 2022, only to resume after the CBN released $265 million to settle its ticket sales. Despite this, Emirates halted operations again after negotiations for further fund repatriations were unsuccessful.
Etihad Airways also joined the list of carriers suspending services to Nigeria due to similar issues surrounding fund repatriation.
Reiterating the CBN’s commitment to resolving the ongoing challenges, Mrs. Sidi Ali highlighted that the bank, under the leadership of Governor Olayemi Cardoso, has embarked on a comprehensive strategy aimed at improving liquidity in the Nigerian FX markets. This strategy is focused on addressing long-standing structural issues that have hindered the effective operation of the market.
The ongoing foreign exchange market reforms by the CBN aim to unify exchange rates, foster greater transparency, and reduce the opportunities for arbitrage, which could help stabilize the currency. Mrs. Sidi Ali emphasized that a stable exchange rate would enhance investor confidence and attract foreign investment into the country.
She also urged all market participants to adhere to the rules and ensure transparency, as this will lead to more accurate exchange rate determination and ultimately contribute to the stability of the Nigerian economy.
The CBN’s actions over the past few months reflect a concerted effort to alleviate Nigeria’s foreign exchange crisis and restore confidence in the financial markets, with the goal of securing a more stable economic future.
