The central bank’s plans to clear the backlog of matured outstanding dollar obligation to select sectors of the economy can be considered as an Xmas gift in a time of recession.
Nigeria’s Apex bank instructed deposit money banks to submit backlog dollar demand from fuel importers, airlines, raw materials and machinery for manufacturing firms and agricultural chemicals.
Nigeria is in its worst recession in 25 years as a sharp fall in oil price and a severe dollar shortage hindered companies from importing raw materials and machinery.
The central bank pegged the currency at N197-N199 for 15 months before adopting a flexible exchange rate that saw the naira lose 40 percent of its value against the dollars.
Because expansion plans and cash flows shrank on the back of an economic downturn, many companies have closed shops while some shed jobs to stay afloat.
Nigeria’s economy contracted 2.1 percent 2.2 percent in the third quarter of the year, according to a recent report by the National Bureau of Statistics (NBS). The IMF forecasts GDP to shrink by 1.7 percent by 2016.
October inflation increased to 18.30 percent, fuelled by high price of imported goods, soaring price of food stuffs and high price of gasoline, according to the NBS.
This means inflation has eaten deep into the pockets of consumers, which will have negative effects on companies’ sales.
The central bank is expected to close all foreign exchange transactions this Friday ahead of its financial year end and the Christmas period, according to Reuters.The naira currency has traded around 305.5 naira to the dollar on the official interbank market since August, while it was quoted at 487 to the dollar on the parallel market on Monday.
Two weeks ago, the bank had asked commercial lenders to submit bids for a special intervention auction targeting fuel importers, but the result of the auction has not yet been released, traders said.
