Reps To Probe CBN’s Invalidation Of $2.4bn Contracts

The House of Representatives Wednesday ordered an investigation into the $2.4bn worth of forward contracts canceled by the Central Bank of Nigeria recently.

The resolution is consequent upon a motion on the “Urgent need to avert the total shutdown of affected Nigerian companies,” jointly sponsored by Hons. Zakaria Nyampa, Ojema Ojetu and Obed Shehu.

It will be recalled that CBN had recently announced the invalidation of approximately $2.4 billion worth of forward contracts sold to manufacturers.

According to the apex bank, the decision was informed by the discovery that the affected businesses failed to fulfill certain conditions.

Leading debate on the motion, Hon Nyampa, member who represents Madagali/Michika Federal Constituency, Adamawa state said, “The invalidated forward contracts were originally entered into about a year ago between various Nigerian manufacturing companies and the Central Bank of Nigeria to hedge against currency fluctuations and risks associated with exchange rates.”

He noted that “Having entered into these agreements, affected companies bank accounts debited in naira equivalents and letters of credits issued by the participating commercial banks, the Central Bark of Nigeria decided to dishonour the contractual obligations and cancelled the transactions, one year thereafter.”

The House added that the cancellation of forward contracts is coming at a time of worsening national economic challenges such as galloping inflation, unemployment, increased poverty level and hardships.

He addes that if the cancellation is sustained, “The said transactions will cause the widespread collapse of small and medium companies and the exit out of the country of large corporations with all the attendant consequences thereof.”

In adopting the motion, the House mandated its Committee on Small and Medium Enterprises to holistically investigate the cancellation of the forward contract deals.

It also urged the committee to invite the CBN governor, Yemi Cardoso and the affected manufacturing companies “To examine their documents with the view to identify genuine companies with legitimate transactions”.