Nigeria’s foreign currency shortage is squeezing life out of Africa’s biggest economy and as in 2015, recession is beckoning.
According to Bloomberg, banks won’t honor card payments, foreign investors can’t get their money out and manufacturers are unable to import vital raw materials as output plunges toward a second contraction in four years.
Dependent on oil exports for half of its revenue, the Nigerian government’s coffers have emptied after crude prices plunged in the wake of the coronavirus pandemic.
There is little prospect of respite any time soon; it needs oil prices of $70 per barrel and production of 2 million barrels a day to balance its budget, but prices are hovering around $40 and OPEC curbs have restricted the nation’s output to about 1.4 million barrels a day.
The evaporation of foreign income forced the central bank to stop weekly interbank foreign-currency sales since March. Now, the effects of the dollar shortage are seeping through to the economy and inflicting pain on Nigerians and their businesses.
The International Monetary Fund predicts Nigeria’s economy will contract by 5.4 % this year, the most in four decades.
Lenders including Guaranty Trust bank plc, Nigeria’s biggest by market value, have cut the amount of foreign currency customers can spend on payment cards abroad to mere $100 a month from $3,000.
Rules on what companies do with dollars they receive have also been changed, according to Emeka Mgbeahuru, who runs Tropitec ltd and importer.
“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”.
The shortage of foreign currency is forcing some companies to consider closing down, said Ubiji.
Business Day, 18 August 2020
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