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…Companies groan as naira slumps further
From Uche Usim, Abuja
President Bola Tinubu, on Monday, reiterated his pledge to clear the foreign exchange backlogs he inherited, as a way of resetting the finance ecosystem and attracting fleeing investors back to the country.
His assurances came as the forex scarcity bites harder, leading to further slump of the naira at the parallel market, where it exchanged for N1,205 to a dollar in Abuja on Monday.
Tinubu spoke on Monday at the opening of the 2023 Nigeria Economic Summit holding in Abuja.
The President said: “All foreign exchange future contracts will be honoured by this government.
“I assure you we have a line of sight to the foreign exchange we need to refloat this economy. And we will get it.”
Before the Tinubu administration came onboard, the Central Bank of Nigeria (CBN) sold forward contracts to several Nigerian businesses with an arrangement to buoy them with foreign exchange at an agreed price in future.
Riding on that, the banks opened Letters of Credit (LCs) to honour the contracts, which importers used to buy goods from foreign suppliers.
Sources, however, explained that the apex bank, since February, has been unable to settle the obligations estimated at $3 billion. A broader backlog, which includes unsettled foreign investors’ contracts, is estimated to be about $10 billion.
These have muddied the waters just as the lingering forex scarcity has tossed several companies into the intensive care unit and crumbling foreign obligations.
Many are gradually shrinking their operations in preparation to finally exit the country to birth on softer grounds.
Entities that took dollar loans are gnashing their teeth as losses swell following the twin blight of forex scarcity and naira depreciation that have battered their operations.
The multinationals are lamenting the impact of persistent dollar scarcity triggered by inadequate supply from key economic agents and the CBN.
As the FX scarcity worsens, affiliate offshore banks are dumping local Nigerian banks and rubbishing their LCs.
This has forced those wishing to transact in FX to do so via cash advances as CBN’s failure to clear the dollar backlog has put local banks in a very tight FX liquidity position.
They have also temporarily shut the door on several transactions including school fees and Personal Travel Allowance applications.
In reaction to that, the naira has tumbled several times in recent months, crossing the dreaded N1,000/$ threshold in the parallel market a fortnight ago and racing towards N2,000/$.
The official rate has also slumped to around N1,000/$ as the apex bank allows the naira to float.
The Diageo subsidiary, Guinness Nigeria Plc, declared a loss of N18.2 billion for 2023 compared to N15.7 billion-naira of profit in the previous year after its finance costs soared on the currency devaluation.
Also, GlaxoSmithKline Consumer Nigeria Plc has announced plans to shut down its operations in the country.
