Unpaid $2.4bn ‘Invalid’ FX forwards could cripple Nigerian companies – NACCIMA

The Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA) has said that the Central Bank of Nigeria’s (CBN) refusal to pay $2.4 billion foreign exchange (FX) forwards may push some Nigerian companies towards insolvency.

NACCIMA National President Dele Oye, in a statement on Thursday, expressed concerns that the failure to honour these FX forwards has saddled businesses and financial institutions with crippling interest rates, averaging over 35 per cent.

Mr Oye said the unpaid claims have further strained relationships with international trading partners and threaten the economy’s overall stability.

In 2022 and 2023, various Nigerian companies and small to medium-sized enterprises (SMEs) entered into FX forward contracts with the CBN.

In February, the CBN announced that a Deloitte audit found $2.4 billion of the $7 billion in FX claims, which have pressured the naira and unsettled the currency market, to be invalid.

“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,” Mr Cardoso said at the time.

The NACCIMA boss noted that the contracts involve exchanging a specific amount of foreign currency at a pre-agreed rate on a future date, but despite the maturity of these contracts, the CBN has yet to settle them.

Mr Oye stated that NACCIMA has actively sought a resolution by urging CBN Governor Olayemi Cardoso to reassess the bank’s position.

He warned that if the issue is not solved amicably, forcing companies to settle at current exchange rates could trigger a further depreciation of the naira, as the market is ill-equipped to handle the resulting surge in demand for US dollars.

“The inability of companies to absorb the exchange rate differences and associated high-interest rates could lead to widespread bankruptcies, further destabilising the economy,” he said.

According to him, the affected companies could face an estimated loss of about N2.4 trillion, which would reduce corporate income tax revenues for the next two to three years, thus threatening federal government revenue.

Mr Oye said the CBN engaged the Economic and Financial Crimes Commission (EFCC) to investigate dubious transactions and prosecute those involved in fraudulent activities.

However, he argued that companies represented by NACCIMA, whose funds are tied up, expressed frustration with the prolonged investigation process, highlighting the severe financial strain and operational difficulties they face.

He said many of these businesses had used bank-confirmed lines to open Letters of Credit (LCs), paid import duties, and received goods, with their suppliers mostly settled by their banks’ correspondent banks. Despite CBN’s claim that the EFCC is investigating, these companies are suffering significant financial pressure from their banks and suppliers, he said.

The NACCIMA boss criticised the CBN’s approach, arguing that it lacked procedural fairness since the affected companies were not given the opportunity to respond to the audit findings before the conclusions were made.

He accused the CBN of breaching contractual agreements by appointing Deloitte and making subsequent decisions without involving the companies, thus violating their right to a fair hearing.

“We have escalated the matter to the Hon. Minister of Finance, the Hon. Minister of Industry, Trade and Investment, and the House Committee on SME at the National Assembly, pointing out the unconstitutional nature of the CBN’s actions,” Mr Oye said.