The Central Bank of Nigeria (CBN), under the leadership of Governor Olayemi Cardoso, has announced the completion of forensic verification processes to clear all pending foreign exchange (forex) backlogs, with payments set to commence imminently.
Governor Cardoso highlighted that it took the bank over twelve months to clear a $7 billion forex backlog in 2024. In March of that year, the CBN declared the elimination of this legacy burden.
Emphasizing a shift from the era of multiple exchange rates that favored a select few, Cardoso warned that any deposit money banks violating the newly introduced Foreign Exchange Code will face sanctions. This code serves as a guideline to promote ethical conduct among dealers in the Nigerian forex market.
Reflecting on past fiscal practices, Cardoso criticized the unprecedented methods of financing that adversely affected the economy, leading to high inflation rates and currency depreciation.
Regarding the Electronic Foreign Exchange Matching System launched in December 2024, the governor noted improvements in market transparency and efficiency. The naira appreciated from N1,663 to the dollar in December 2024 to N1,536 as of January 27, 2025. Additionally, the nation’s external reserves grew to $40.7 billion as of December 2024.
These developments underscore the CBN’s commitment to fostering a stable and transparent foreign exchange environment in Nigeria.
How the Forex Backlog Developed and Was Partially Cleared in 2024
The backlog of foreign exchange (forex) payments in Nigeria began to accumulate due to a combination of policy missteps, a declining inflow of foreign exchange, and the strain of multiple exchange rates. Under previous administrations, the Central Bank of Nigeria (CBN) adopted measures such as the restriction of access to forex for certain goods and services, and the rationing of forex allocations to banks and businesses. These measures created a significant gap between demand and supply, ultimately leading to the backlog.
In 2020 and 2021, the challenges were exacerbated by the global economic downturn triggered by the COVID-19 pandemic, which reduced Nigeria’s crude oil earnings, the primary source of foreign exchange. Additionally, delayed remittances and limited inflow from foreign investors worsened the pressure on forex liquidity. As the CBN attempted to stabilize the naira using reserves, it further constrained its ability to meet dollar-denominated obligations, leading to a pile-up of unpaid forex demands.
By 2024, under the leadership of Governor Olayemi Cardoso, the CBN embarked on a significant reform agenda to tackle the issue. A forensic verification process was initiated to authenticate claims of forex entitlements and address concerns over inflated or fraudulent claims by certain businesses. The verification allowed the CBN to identify genuine obligations and streamline its payment strategy.
That same year, the bank successfully cleared $7 billion of the outstanding forex backlog. This was made possible through a combination of measures, including more transparent allocation systems, fiscal discipline, and improved management of Nigeria’s external reserves. In March 2024, the CBN declared that the backlog inherited by the administration had been substantially reduced. The success of these measures also coincided with the elimination of the multiple exchange rate regime, which had allowed some privileged businesses and individuals to benefit at the expense of broader economic stability.
The partial clearance of the backlog restored some level of confidence among foreign investors and businesses. However, challenges persisted as the remaining backlog and continued demand for forex placed ongoing pressure on the system. Governor Cardoso’s recent announcement of clearing the remaining backlog signals the CBN’s commitment to fully resolving this issue and establishing a more stable forex environment for Nigeria’s economy.
