• Thursday, February 29, 2024
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Dollar shortage reality bites from large firms to small traders


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.