Nigeria’s economic recovery dependent on stronger forex action –World Bank

The Central Bank of Nigeria (CBN) must ramp up actions to reduce pressure on the currency market to meet ballooning demand for hard currency in Nigeria, the World Bank said.

Even though the multilateral lender supports the restart of dollar sales following five months of break, “continued and even stronger action and a clear commitment from the central bank will go a long way towards facilitating a stronger recovery,” World Bank country director, Shubham Chaudhuri said in an emailed response to a query by Bloomberg on Friday.

Nigeria has been at the mercy of acute dollar shortage after the apex bank called off its weekly interbank foreign exchange sales in March.

The coronavirus outbreak and lockdown of economies triggered a slump in the price of oil, which contributes over 90% of the nation’s foreign exchange earnings.

Dollar tap of oil money into Africa’s biggest oil producer has been running dry following a record oil crash in April, setting in motion a 43.2% fall in foreign exchange inflow in May, the CBN said in its monthly economic report for May.

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Importers and businesses have said CBN’s moves to strengthen the naira and shore up dollar reserves have hampered their operations and ability to repay dollar debt.

On Thursday, London-based Financial Times reported that the Azura Power Plant, financed in part by the private-lending unit of the World Bank, might default on its dollar-denominated debt on account of dollar scarcity.

“The Azura case is just one example of the difficulties that a number of established foreign and domestic private firms in Nigeria have had in accessing the forex to meet their business and contractual obligations,” Chaudhuri said.

From banning the use of middlemen in import transactions to calling out exporters that don’t repatriate proceeds, the CBN is trying to avert devaluing the naira again.

President Muhammadu Buhari on Thursday directed the regulator to halt forex for importation of food and fertiliser.

Since the Godwin Emefiele-led CBN was forced to devalue the naira twice, the local currency has lost a quarter of its official value.

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