Nigeria’s all-out effort to defend its currency by targeting importers and exporters with tougher regulations risks pushing more traders to the black market for their dollars.
As a scarcity of foreign-exchange worsens in Africa’s largest economy, the central bank on Tuesday ordered banks to report exporters that fail to repatriate income made abroad. The directive comes only a day after the regulator banned importers from using external agents to pay for goods, a bid to keep money inside the nation’s borders.
The threat of punishment, which could see exporters banned from accessing dollars, won’t work, said Bamidele Ayemibo, the lead consultant at 3T Impex Trade Academy in Lagos, an adviser and trainer on exports and imports. The cost of exports is secured at the parallel-market rate, while the central bank wants to force firms to repatriate foreign currency at a loss at the much stronger official rate for the naira.
“The central bank saying they would sanction them is laughable,” he said. “If they sanction them, then they would just kill exports completely.”
For Ayemibo, Central Bank of Nigeria is trying to avoid allowing the currency to float freely.
“CBN should do what it needs to do to encourage exporters to repatriate -- first by allowing market forces to determine the price at which they sell -- and then sanctioning those who don’t repatriate after,” he said.
Importers are also likely to balk. Multinationals and large local manufacturers have big foreign-exchange needs and agents in Europe or Asia who purchase raw material, machinery and equipment on their behalf. The central bank is also introducing a process to verify prices of items being imported, which could cause delays.
“We expect some form of push back,” United Capital Plc said in a note.
‘Further Pressure’
In the absence of exceptions for key importers, the naira will probably weaken further in the parallel market, fueling “never-ending speculative attacks on the local unit,” United Capital said.
A spokesman for the central bank didn’t immediately answer a text message to his mobile phone.
The naira has been devalued twice this year after the drop in the price of oil, the country’s main foreign-exchange earner. The central bank stopped regular interventions in the foreign-exchange market in March, leaving foreign investors trapped in the local market and manufacturers struggling to access greenbacks to import raw materials.
The parallel dollar-market rate, which the central bank says is illegal, is near a two-year high of 477 naira. The dollar trades at about 388 naira in the more flexible investors and exporters window, where liquidity has thinned out due to a lack of inflows.
Lenders including Stanbic IBTC Bank Plc and Zenith Bank Plc have also cut the amount of foreign currency customers can spend abroad. Guaranty Trust Bank Plc has stopped cash withdrawals from dollars accounts unless physical dollars have been deposited.
Facing Bankruptcies
The currency shortage is now playing out in another part of the market. Licensed bureau de change operators are complaining they’re on the brink of collapse after the central bank stopped making foreign-exchange sales to them, while illegal money changers are thriving.
“People cannot pay for offices, staff, not even regulatory fees or taxes,” said Aminu Gwadebe, the president of the Association of Bureau De Change Operators, which has about 5,000 members. “We don’t have any sources, all our sources are shut down. We are the most vulnerable.”
Bloomberg
