Clearing of FX backlog contributed to foreign reserves increase, says Cardoso

Olayemi Cardoso, governor of the Central Bank of Nigeria (CBN), says the clearing of the foreign exchange (FX) backlog contributed to the rise in foreign reserves.

Cardoso spoke at the CBN governor’s annual lecture series held at the Lagos Business School (LBS) on Friday.

The CBN, on March 20, said it had successfully settled all outstanding FX obligations.

Speaking on the issue, Cardoso said the clearance was part of his commitment, upon assuming office, to uphold the credibility of the apex bank.

“I had no idea in my mind that that particular action contributed in no small way, and it may not appear to many as such, but it contributed in no small way to the rise in foreign exchange reserves that we have been able to accomplish,” Cardoso said.

He said when an economy lacks credibility, it loses public trust and discourages investment.

“When I took office, I made a promise that we would clear the verifiable backlog of monies that were owed by Nigeria to the third parties. And it was at the time estimated at over $7 billion,” he said.

“And to be honest with you, I had no idea how I was going to do it, but I just felt it was not something to be negotiated.

“We needed to ensure that we protected and maintained our integrity. How we would do that, we would have to sort it out.”

Cardoso said the CBN commissioned a forensic audit as the country gained a clearer understanding of the issues.

He said based on the audit’s recommendations, the bank cleared the FX backlog transactions — a move he described as a significant sacrifice.

“Because some people would have argued that why pay it? It didn’t take place when you came there. Put existing obligations first and worry about that. But I said no, we cannot afford to do that.”

He said the CBN was concerned that if investors are expected to continue to “trust and invest in our economy”, the country has to keep its promises.

“People come to you, they invest in you when you have credibility and they trust you,” Cardoso said.

“They don’t put things with you and go away and come back and ask for it back and say, oh I don’t have it.”

He added that maintaining trust remains crucial for the CBN.

On September 23, Nigeria’s FX reserves grew by $1.03 billion in one month.