Invalidation of $2.4Bn Forward Contracts by the CBN; How many more manufacturers will be forced out of business?

Imagine sailing on a calm sea, charts meticulously plotted, course set for prosperity. Suddenly, a colossal wave looms on the horizon, threatening to engulf your vessel and everything you hold dear.

This is the chilling reality facing Nigerian businesses, investors, manufacturers and citizens alike, thanks to the Central Bank of Nigeria's (CBN) recent invalidation of $2.4 billion worth of forward contracts. The governor of the Central Bank of Nigeria, Dr Olayemi Cardoso, during an interview on Arise TV, on the February, 5th 2024 addressed concerns about the recent volatility in the currency market and said that about $2.4bn of the $7bn foreign exchange backlog he met when he got into office were from non-existing entities, requests without import documents among other infractions.

As a financial enthusiast with a keen eye on Nigeria's economic well-being, the recent invalidation of $2.4 billion worth of forward contracts by the Central Bank of Nigeria (CBN) sends chills down my spine. This policy, shrouded in a fog of technicalities and accusations, reeks of inconsistency and recklessness. The CBN claims to have uncovered a "forex trading fraud," but according to Social Integrity Network, (SINET), a non-governmental organisation, representing legitimate businesses unfairly caught in the crossfire, vehemently disputes this narrative. They paint a picture of meticulous planning, with companies securing forward contracts 18 months ago at N450/dollar, only to have the rug pulled from under them today. Now, they face a staggering 333% increase in costs, a financial tsunami that could drown them entirely.

But this isn't just a corporate tragedy; it's a national emergency. Businesses, large and small, are gasping for air. Those who swallowed the bitter pill of borrowing funds at exorbitant rates (some exceeding 30%) to secure these contracts are now drowning in interest payments and potential defaults. Banks, caught between a rock and a hard place, struggle to fulfill their offshore obligations, jeopardizing their own creditworthiness and the nation's financial standing.

The ripple effects are as devastating as they are widespread. The manufacturing sector, already grappling with inflation and a volatile exchange rate, now faces imminent collapse. Nearly 60% of companies have already shut their doors, and this policy threatens to wipe out the remaining 40%. This translates to millions of lost jobs, plummeting production, and a drastic decline in GDP, pushing countless Nigerians deeper into poverty. According to the latest figures from the National Bureau of Statistics, unemployment climbed to a staggering 5.0 per cent in the third quarter of 2023 from 4.2 per cent in the previous quarter and Nigeria’s annual inflation rate rose to 29.90 per cent in January from 28.92 per cent in December 2023. The manufacturing sector, once a pillar of the economy, has witnessed a decline of 15% in production output year-on-year. These alarming statistics paint a grim picture of an economy on the brink.

The industry is currently burdened with the effect of fuel subsidy removal and devaluation of the naira that has led to hyper increase in the cost of production. With the cancellation of forward contracts that has already been utilized for LC establishments, shipment and costing of products already sold by these companies, it would be practically impossible to recover this cost on current production.
This policy will gradually collapse the manufacturing sector, the projected GDP growth rate for the country will collapse and the attendant impact on the microeconomic variables of the Federal Government will be adverse.

This policy isn't just a financial burden on manufacturers; it's a ticking time bomb for everyday Nigerians. Already grappling with rising costs, businesses will be forced into desperate measures to survive, pushing production costs even higher. Imagine the ripple effect: essential goods become out of reach for the average citizen, their basic needs unmet. This simmering frustration could easily boil over into widespread social unrest, destabilizing the very fabric of our nation
But the damage doesn't stop at the water's edge. Failure to honor these contracts could shatter Nigeria's international reputation, branding it as an unreliable and risky investment destination. This, at a time when the government desperately seeks foreign investors, is an act of self-sabotage, undermining years of progress and jeopardizing the nation's future prosperity.

Thankfully, we haven't reached the point where rescue efforts are futile. There's still time to navigate this treacherous storm, but it requires immediate action and a complete course correction. Open communication and transparency are the lifeline we desperately need. The government and CBN must engage with stakeholders to understand the true impact of this policy and explore solutions. A thorough review with clear criteria for identifying genuine transactions, coupled with exploring compensation options for unfairly impacted businesses, is crucial to restoring trust and preventing further economic calamity.

The CBN’s proactive measures to stabilize the foreign exchange market and stimulate economic activities is commendable, I urge the authorities to prioritize long-term economic growth and a fair playing field for legitimate businesses. This isn't just about numbers; it's about the lives and livelihoods of millions of Nigerians. We must act with transparency, fairness, and a commitment to sustainable development. This is not the time for knee-jerk reactions and opaque pronouncements. This is the time for clear communication, collaboration, and decisive action to steer our nation away from the impending economic tsunami. Together, we can build a stronger, more resilient Nigeria, but only if we choose the path of transparency and act with urgency.

In conclusion it is important for the CBN to re-evaluate this policy direction and ensure that customers with valid export documentations are exempted from the list of invalid forward contract obligations. This can be ascertained by requesting documents to prove funds was utilized for importation such as:

1.Valid Form M approved by the CBN

2. Evidence of establishment and transmission of LC

3. Bill of Lading Documentation

4. Evidence of Custom Duty payments for imported products

This will help the CBN separate genuine customers that have utilized the forex allocation for legitimate business from those who may have diverted the forex for other uses. The current approach of the CBN is punitive and has far reaching adverse effect on the economy. The CBN must also note that all the forex allocation was legitimately awarded by the apex banks and cannot seek to declare invalid same based on technicalities. The invalidation of $2.4 billion forward contracts by the CBN represents a significant setback for Nigerian manufacturers, further exacerbating the economic crisis gripping the nation. Urgent measures must be taken to address this issue and provide much-needed relief to businesses struggling to survive amidst unprecedented challenges.

Falola Shuaib is a Finance expert writing from Abuja, Nigeria.

SRC: https://dailynewsreporters.com/cbns-2-4bn-contract-invalidation-how-many-more-businesses-will-be-forced-to-close/

Ebi mpa mi ooo



I don't have enough strength to read that

Most Nigeria bankers with nnpc have been colluding with evil politicians to sabotage naija foreign exhange,circumvented cbn policies to loot and fleeced the nation of its oil wealth for 24years running of naccent democrazy

The 2.4Billion was considered invalid after independent examination by independent auditors. I believe some of them will probably still be cleared after the documents had been ironed out. It is however wrong to portray CBN as a charlatan denying legitimate businesses of their right due. It is an open secret that was excessive fraud in the forex sector prior to the current reform.

Nigerians can use any medium to engage in corrupt practices, manufacturers were meant to get cheap dollars from the government, people who wanted to use dollars for personal gains would sign up too without importing anything. Same thing they do with PTA and BTA. God bless the president for removing all these loopholes, it's same people you will see crying online that the government is doing nothing.

Dijita:
The 2.4Billion was considered invalid after independent examination. I believe some of them will probably still be cleared after the document had been iron out but it is wrong to portray CBN of denying legitimate businesses of their right due. It is an open secret that was excessive fraud in the forex sector prior to the current reform.

thank you excessive fraud in forex market,so many infractions committed on behalf of socalled elite/politicians/public office holders since 1999, they own banks and bdcs used for this malfisants.

Corruption will always fight back.

Mr. Falola SHUAIBU, you have not offended anyone.

You are only working for your pay.

The CBN governor succinctly explained himself well during the interview that CBN had external auditors to look at those claims and found a few of them to be bogus.

He stated that money owned will be released to genuine claimants, which is the right approach.



If we can’t run our affairs well and signal to the rest of the world that we intend to do things rightly, foreign investment won’t come into the country.

Lol if they've a claim and have documents to back it up they should take CBN to court...

They should go prove them sef as entity with a valid document and valid claim ....


Abi na Journalist una wan pay to recover the money...

Cause this looks like a paid article...

Trying emotional blackmail through Journalst when the court is there....

Dijita:
The 2.4Billion was considered invalid after independent examination by independent auditor. I believe some of them will probably still be cleared after the documents had been ironed out. It is however wrong to portray CBN as a charlatan denying legitimate businesses of their right due. It is an open secret that was excessive fraud in the forex sector prior to the current reform.

Don’t mind them, people who have been milking the system for years….obtaining forex at the official rate and either not importing anything or importing but selling as if they obtained forex at the parallel rate. We know them..some of them own supermarkets, import everything and anything, things they can manufacture in Nigeria. They made so much money exploiting the system, they bought shares in banks to secure their flow of official forex and they are the ones shouting consumption to production.

This piece is judgemental to me, anyone with legitimate claim can always appeal any policy; I don't believe the statement from central bank can not be appealed to in court or other bodies established for such issues.

nairajotter:
Invalidation of $2.4Bn Forward Contracts by the CBN; How many more manufacturers will be forced out of business?




SRC: https://dailynewsreporters.com/cbns-2-4bn-contract-invalidation-how-many-more-businesses-will-be-forced-to-close/

Lol

Anybody that wanna get Nigeria cleaned up will face heaps of garbage in nnplc,banking system,in ministries,mdas,assemblies,aso rock, fec etc that was left behind by predecessors who will in turn use the ignorant masses to rant and cover his mess.This is what is happening now.
ALL NAIJA CRUDE FROM 1999 TODATE,WHERE ALL THE REVENUE GO? NO NAIJA PERMANENT REFINERY NO STEADY POWER FR OBJ TO JONA TO BUHA SAME GARBAGE YOU HEAR.
UNA DEY SHOUT TINUBU,YEYE PPL.

As the orphan and handicap you are

christejames:
Ebi mpa mi ooo



I don't have enough strength to read that

You alleged that 60% of manufacturers have closed down their factories, but there has only been a 15% decline in total manufacturing output. This seems inconsistent and leads me to believe it is a disguised attempt to persuade the CBN to reinstate those contracts.

Ok

Lollz. So many urrcchnns above defending the CBN.

Sometimes you wonder how these paid agents comment on every sector.

You would wonder whether they are Coordinating Ministers.

They appear to know what is going on behind closed doors of every sector of government

Lollz

As far as I am concerned Cardoso is on the right track. After all we had a CBN governor there before who was busy trading in dollars and ruining our economy

All the fraudulent applications are in jeopardy.

nairajotter:
Invalidation of $2.4Bn Forward Contracts by the CBN; How many more manufacturers will be forced out of business?




SRC: https://dailynewsreporters.com/cbns-2-4bn-contract-invalidation-how-many-more-businesses-will-be-forced-to-close/

So many thieves caught in the net.

VULCAN:
Lollz. So many urrcchnns above defending the CBN.

Sometimes you wonder how these paid agents comment on every sector.

You would wonder whether they are Coordinating Ministers.

They appear to know what is going on behind closed doors of every sector of government

Lollz

ppogba:
Corruption will always fight back.

Mr. Falola SHUAIBU, you have not offended anyone.

You are only working for your pay.

But the points he made are valid especially if you look at the concluding part of the article.

If they have valid documentation let them bring it forward and make their case it's as simple as that.

That's yah own cup of tea ☕

Chai..


The way we hear FAt monies in Nigeria is Sapionocious!!


No wonder our eyes are too big when it comes to money, that we intimidate other Africans and people all over the world!!


Chai..

As usual, paid writers looking to incite the people's emotions against the government and steal public funds.
If you have the documentation for your $2.4B, present it to the central bank.

Greedy people have the highest concentration in Nigeria when you all spoil this country for your selfish interest

Government officials will divert funds
Corporate world will inflate and divert

This country on a long thing

I don't think il be affected since I'm now manufacturing my own small cheap inverters that are very rugged. I use this boards and I don't mind teaching you how to

How does this affect investor's confidence?

This piece only shows corruption fighting back.when you try to do the right thing in nigeria,Nigerians benefitting from the corrupt system will always fight back.They are hiding under the umbrella of MAN to commit forex scam and portraying millions of Nigerians will lose their job if this is looked into.Was there ever any job in the first place?

Greenfaces:
I don't think il be affected since I'm now manufacturing my own small cheap inverters that are very rugged. I use this boards and I don't mind teaching you how to

your contact please

Sheriff19:
your contact please

I sent you an email