Nigerian businesses large and small are beginning to
feel the impact of the current dollar shortage and devaluation in the
black foreign exchange FX market .
Since the Central Bank of Nigeria (CBN) cut dollar access
to importers of 41 types of goods, ranging from private jets to rice,
Eurobonds and foreign shares, importers say they have been unable to pay
suppliers, while elevated demand in the black market has led to the
naira trading as low as N240 per dollar.
The cash deposit restrictions placed on Nigerians
operating domiciliary accounts has also meant most traders have been
unable to order for goods as quickly as before.
“I used to be able to easily send money to the U.S for my
partner to ship my goods down,” said Solomon Ndubuisi, a dealer in
imported female bags and shoes, in a downtown Lagos market known as
Balogun.
“The CBN daily withdrawal limit of $300 has changed all
that now and I have to wait for up to three weeks to gather a reasonable
sum. The black market rates are expensive and we can’t really increase
prices because customers are not buying as much anymore.”
The more than 50 percent slide in oil prices since 2014
has negatively hit government spending and its trickledown effect to
consumer spending in Africa’s largest economy.
The dollar shortage that the fall in hard currency
earnings has caused has led to a huge premium for dollars sold on the
black market which is slowing down trade and consumption that make up a
big chunk of Nigeria’s GDP.
The International Monetary Fund (IMF) estimates Africa’s
largest economy will expand by 4.8 percent in 2015, less than the 6.8
percent of 2014.
For larger companies operating in the country, a big problem is the pressure on earnings from the naira drop.
“Nigerian Breweries (NB) reported its 1H FY15 numbers
which were poor across the board,” Renaissance Capital Analysts Omair
Ansari and Olaloye Oyawoye, said in a July 23 note.
“We have lowered our industry and company growth forecasts
for FY15 and FY16 as the consumer remains severely constrained. We
expect further downside to margins, given pressure on the naira.”
Shoprite Holdings Ltd.’s said in the statement yesterday
that Nigerian sales “were negatively affected by the drop in oil prices
and the currency depreciating against the U.S. dollar.”
MTN Group Ltd., Africa’s largest wireless operator, said
on August 5 first-half profit declined 11 percent, missing analysts’
estimates, as sales fell in the company’s largest market and
foreign-exchange movements in the rand against the naira weighed on
earnings.
The naira has fallen some 22 percent in the past year on the interbank market, to N199 per dollar.
Nigeria’s dollar reserves are down one-fifth to $31.6 billion since the end of September 2014.
Investors have sold down stocks of companies operating in Nigeria as a result of the dollar availability uncertainty.
The Nigeria Stock Exchange declined by 2.59 percent to
29,909.44 points on Monday, dragging the index to a four month low, of
-13.70 percent.
“We believe investors are apprehensive of the current
risk- return profile of the Nigerian economy, especially with falling
global oil prices, unstable exchange rate and the uncertain policy
direction of the current government,” said Meristem Securities analysts
in a Aug 17 market update.
PATRICK ATUANYA
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