Deloitte Forensic Audit Shows $2.4bn FX Forwards Backlogs Invalid – Cardoso

A forensic audit carried out by consulting firm Deloitte on the $7 billion of FX forwards obligations of the Central Bank of Nigeria (CBN) has revealed that $2.4 billion or 34% of the claims are invalid.

Governor of the CBN, Mr. Olayemi Cardoso, said this while speaking in an interview with Arise Television, monitored by MoneyCentral.

Cardoso disclosed that the bank had settled verified FX requests, which amounted to $2.3 billion. He added that current total outstanding FX obligations stood at $2.2 billion.

Cardoso further indicated that part of the headline $7 billion outstanding FX claims were fraudulent, citing the outcome of a forensic audit by Deloitte Management Consultant, which was commissioned by the apex bank.

“We met the issue of FX backlogs when we came in. Approximately $7bn is what we were told the backlogs were. We contracted Deloitte forensic audit for valid transactions. Of the $7bn, $2.4bn had issues with infractions so we are not paying. We have settled $2.3bn. What remains is $2.2 billion. We wrote to the authorised dealers to explain the disparities identified. Sadly, quite frankly, I think much of those have not been disputed to our satisfaction,” Cardoso said.

Nigerian banks have placed significant foreign currency (FX) with the central bank in the form of derivative transactions (including swaps and forwards).

The swaps positions are equivalent to $21 billion while there is a further $6.8 billion exposure in the form of FX forwards, banking sources tell MoneyCentral.

Cardoso did not address the issue of swaps in his interview.

Strategy on FX Inflows

There are indications that some of those outlays may violate the net open position (NOP) guidelines of the regulator.

“We are looking aggressively on the supply side. A number of banks have no business holding the FX they have via NOP. We have told them to sell. On IMTOs very little flows have gone through the official market. No incentive not to go through the official channels with convergence of rates. We are increasing our surveillance of the markets,” Cardoso said.

Banks are not expected to have more than 20% of their unimpaired shareholders funds as net open position limits.

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