Nigeria still operates an official exchange rate and provides dollars via the central bank to customers at that level.

But a lack of dollars in the domestic market means there’s a backlog of demand from companies who want to convert naira into the US currency to repatriate profits and pay bills. That’s pushed activity into the unofficial market, where the naira changes hands at much weaker levels against the dollar.

Minister of Finance Wale Edun said the central bank puts the current backlog at about $5 billion, following efforts to pay it down, and he voiced confidence that it could be cleared easily if steps to lift oil revenue and mobilize dollars already in the economy succeed.

“There is actually liquidity within the banking system and there should be a way of getting the banks to actually help with that backlog, either on a spot or a forward-rate basis,” he said. “We believe that if we coral the dollars that are available, we can pay down that backlog almost in one fell swoop.”

The government expects oil production to ramp up to 1.78 million barrels per day, from about 1.49 million barrels last month, which should help fire up the economy and bolster its coffers.

Domestic refining of crude is meanwhile expected to resume this year at the state-owned refinery in Port Harcourt, and from the Dangote refinery in Lagos, which will reduce gasoline imports and help ease the currency squeeze.

“The priority is to stabilize the naira, that means getting in the additional liquidity – number one from oil revenue,” Edun said. “We’re also looking to make sure we tap Nigerian savings, in particular domestic dollar savings both inside and outside the formal market. There’s a lot of cash in the Nigerian economy.”

Bloomberg