Banks won’t honour card payments, foreign investors can’t get their money out and manufacturers are unable to import vital raw materials as production retreats towards a second contraction in four years.
The Nigerian government, which relies on oil exports for over 50 per cent of its revenue, has had its treasury emptied after the tap of oil money ran dry following the recent oil crash and the pandemic outbreak.
The immediate future holds a little hope as Nigeria requires oil prices of $70 a barrel and daily output of 2 million barrels to balance its budget, but prices have been hovering around $40 and OPEC cuts have limited the country’s production to around 1.4 million barrels a day.
Weekly interbank forex sales have been called off since March by the central bank as a result of an absence of foreign income.
‘A lot of the members can’t access the amount of dollars they need from the banks. That is constraining business,’ said Eke Ubiji, Executive Secretary of the Nigerian Association of Small and Medium Enterprises.
The International Monetary Fund projects Nigeria’s economy will shrink by 5.4% this year, the highest in forty years. The most recent official job figures estimated second-quarter unemployment rate at 27.1%, the highest in a decade.
Inflation, escalated to 12.8% in the year through July, from 12.6% the month before as costs of imports and those of foods soared.
Banks, including Guaranty Trust Bank, have slashed the amount of foreign currency that customers can spend on payment cards overseas to $100 a month from $3,000.
Emeka Mgbeahuru, who runs Tropitec Limited, an importer of agricultural equipment from China and Italy with distribution links across West and Central Africa, said rules on what firms do with the dollars they receive have been changed also.
‘When you source your own dollars, they won’t let you pay in cash into your account and won’t let you transfer to your suppliers,’ Mgbeahuru told Bloomberg on phone Onitsha.
Many banks are adopting the model they deployed when faced a similar situation in 2016, which was to reduce customers’ foreign payments and wait for oil prices to recover before raising the limits.
‘The challenge with dollar liquidity is an industry-wide problem,’ said Bridget Oyefeso-Odusami, a spokeswoman of Stanbic IBTC Bank Plc, which cut its customers’ card spending to $500 monthly.
The dearth of foreign exchange is compelling a lot of companies to consider shutting down, Ubiji said.
‘If that happens, it has a ripple effect, which is loss of jobs,’ he added. ‘We wish the situation changes for the better.’
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