The Nigerian central bank should step up efforts to ease pressure on the foreign-exchange market to meet growing demand for hard currency in Africa’s largest economy, the World Bank said.
While it welcomes resumption of dollar sales after a five-month hiatus “continued and even stronger action and a clear commitment from the central bank will go a long way toward facilitating a stronger recovery,” World Bank country director, Shubham Chaudhuri said in an emailed response to a query by Bloomberg.
The West African nation was hit by a severe shortage of dollars after the central bank halted its weekly interbank foreign-currency sales in March. The outbreak of the coronavirus and subsequent lockdown of major economies led to the slump in the price of crude, which accounts for more than 90% of the nation’s foreign-exchange earnings.
Businesses and importers have complained central bank measures to defend the naira and preserve foreign reserves have hurt their operations and capacity to repay dollar debt. The Financial Times reported on Thursday that power plant Azura, partly financed by the private-lending arm of the World Bank, could default on its dollar-denominated debt because of the dollar scarcity.
“The Azura case is just one example of the difficulties that a number of established foreign and domestic private firms in Nigeria have had in accessing the forex to meet their business and contractual obligations,” Chaudhuri said on Friday.
From banning the use of agents in import transactions to calling out exporters that don’t repatriate proceeds, the central bank is trying to avoid another devaluation of the naira. On Thursday, President Muhammadu Buhari ordered it to stop providing foreign exchange for food and fertilizer imports.The official naira rate has lost a quarter of its value after the central bank, led by Governor Godwin Emefiele was forced to devalued it twice.