The Central Bank of Nigeria (CBN) has officially confirmed that the long-awaited payments for the country’s foreign exchange (forex) backlog will soon begin. This comes after a forensic verification process that took more than a year to complete. The Governor of the CBN, Olayemi Cardoso, made the announcement during the recent launch of the Foreign Exchange Code, underscoring the critical importance of stabilizing Nigeria’s forex market.
In a speech that reflected both satisfaction and concern, Cardoso noted that the backlog had amounted to a staggering $7 billion. Despite the protracted nature of the process, which stretched across much of 2024, the CBN’s intervention marks the end of a dark chapter in Nigeria’s economic landscape.
“We have faced the challenges of a multiple exchange rate system that disproportionately benefited a select few,” Cardoso lamented. He further emphasized that the completion of the backlog clearance represented more than just a financial gesture—it was symbolic of a wider effort to ensure equity in the nation’s foreign exchange dealings.
The backlog had been a major concern for Nigerian businesses, especially those dependent on dollar-based transactions for imports and international operations. The clearance process, according to Cardoso, was more than just about restoring financial order; it was a response to years of economic mismanagement.
“Clearing the backlog wasn’t just an operational task—it was necessary to restore confidence in the Nigerian forex market,” he added. “We have removed a significant legacy burden that impacted businesses and the general economy.”
A Commitment to Transparency and Ethical Practices
During his address, the CBN governor reaffirmed the bank’s commitment to a single exchange rate regime, stating that the days of multiple exchange rates in Nigeria were over. He also announced that the newly launched Foreign Exchange Code, which outlines ethical standards for foreign exchange dealers, would be a cornerstone of future regulatory efforts.
The Forex Code aims to instill ethical conduct among the dealers in the foreign exchange market, aiming for transparency and fairness. However, Cardoso made it clear that the CBN would not tolerate violations of the new rules. Banks that fail to comply with the guidelines could face severe sanctions.
“The launch of the Foreign Exchange Code is a commitment to promoting transparent and ethical practices in the market,” Cardoso asserted. “Any bank that flouts these ethics will face consequences, and we are serious about enforcing this.”
With the passage of time, the practice of offering preferential exchange rates to certain favored individuals or companies had created an environment where the forex market was seen as opaque and unfair. This practice fueled inflation, led to a depreciation of the naira, and further eroded public trust.
A New Era for Nigeria’s Forex Market
The CBN has also made strides in enhancing market efficiency, a move that has been met with cautious optimism. One of the key steps in this reform process was the introduction of the Electronic Foreign Exchange Matching System (EFEM), launched in December 2024. The system, which uses technology to facilitate smoother and more transparent foreign exchange transactions, has already shown signs of improving the overall market performance.
Since the introduction of the system, the naira has seen significant improvements, gaining ground against the dollar. According to the latest reports, the exchange rate dropped from N1,663 per dollar in December 2024 to N1,536 per dollar as of January 27, 2025—a promising development for both businesses and consumers alike.
“With the electronic system, we’ve ensured that forex trading is now much more transparent. There’s greater market efficiency, and this will be beneficial to everyone involved in forex transactions,” Cardoso explained.
As of the end of December 2024, Nigeria’s external reserves had increased to a healthy $40.7 billion, another sign of the country’s recovery and growing economic stability. The CBN governor linked the increase in reserves to the improved forex market conditions, adding that the country was now in a stronger position to weather future economic storms.
Tackling the Legacy of ‘Ways and Means’ Financing
In addition to addressing the forex crisis, Cardoso took the opportunity to reflect on the broader economic policies of recent years. He was particularly critical of the “ways and means” financing practices used by previous administrations, which he argued had severely harmed the country’s economic stability.
“During the previous era, we saw an unprecedented reliance on ways and means financing, a practice that contributed to high inflation and a weakened currency,” he remarked. This approach, which involves borrowing from the Central Bank to cover budgetary shortfalls, led to an unsustainable expansion of the money supply, which, in turn, sparked inflation.
The CBN Governor acknowledged that it would take time for the effects of these reforms to be fully felt but emphasized that they were an essential part of the country’s ongoing recovery. “We are undoing years of damage, and while the full impact of our efforts may take time to materialize, we are laying the groundwork for a stronger, more resilient economy.”
Looking Ahead: Restoring Investor Confidence
As Nigeria’s economic challenges continue to evolve, it is clear that much work remains to be done. However, the recent developments surrounding the forex market, the clearance of the forex backlog, and the introduction of key reforms are all steps in the right direction.
Market analysts are cautiously optimistic about the future. If the CBN’s actions result in sustained stability, it could go a long way in restoring investor confidence, encouraging foreign investment, and stabilizing Nigeria’s overall economic situation.
“These steps are an important part of restoring trust in the Nigerian economy,” said a financial analyst who spoke on the condition of anonymity. “The next few months will be crucial in determining whether the CBN’s efforts will bear fruit in the long run.”
