Some Nigerian firms settle for dollar loans to bridge forex needs
By Oludare Mayowa
As Nigeria continues to experience dollar shortage, many companies have decided to explore fresh options to sourcing needed foreign exchange for the procurement of raw materials and machinery to prevent disruption of their production lines.
The Global Financial Digest exclusively gathered that some companies in their desperation have decided to explore the option of borrowing dollar from some foreign banks with local units to enable them to sustain production and avoid disruption of their supply chain.
Sources within the manufacturing sector told our reporter that obtaining dollar credit may be expensive but it is the shortcut to access the needed dollar to keep their operations going.
“We have decided to end the endless waiting to obtain dollar from the official source and settled for dollar loans from one of the local banks,” a senior official of one of the companies revealed to our correspondent.
Another top official of a company currently on queue for forex at the Central Bank of Nigeria (CBN) said his company is also weighing the option of dollar loan if all efforts to source enough dollars from the CBN window fails.
“The process is cumbersome and with the look of things, the CBN may likely not be able to meet the backlog of demand for forex in the next one year unless things improve,” the official who declines to be named said.
The CBN sold around $400 million on both the future and spot markets last week in a bid to reduce the backlog of demand on the domestic foreign exchange market.
However, insiders said the dollar sales by the regulatory bank is like a drop in the ocean, as the backlog of demand for foreign currency by both offshore investors waiting to repatriate their funds outside the country and local manufacturers and importers seeking dollar to procure goods and raw materials keep mounting.
Some of the officials who spoke with our correspondent said the situation is becoming critical and many companies might shut down their production lines in the next couple of months as a result of their inability to obtain dollars to procure raw materials and machinery spare parts.
Some of the companies said they cannot go to the parallel market to source foreign exchange because of governance issues and other complications that could arise from doing that.
“Since the beginning of the year, we have not been able to obtain more than 20 percent of our foreign exchange requirement from the official source,” a procurement official in a cable manufacturing firm said.
The CBN has devalued the naira thrice this year as part of measures to achieve unification of exchange rates in all the segments of the forex market and curb speculations on the local currency.
However, the spread between the exchange rate at the parallel market and the CBN window remains wide in spite of the devaluation of local currency and measures adopted by the CBN to ration dollar to importers and offshore investors.
The naira traded at N480 to the dollar on the parallel market on Friday, closed at N394 on the Investors and Exporters’ (I&E) forex window while the CBN continues to quote N379 per dollar as its official exchange rate.
Nigeria has been badly hit by the coronavirus pandemic and an oil price crash that has hammered the economy that relies on crude sales for government revenues, triggering a historic decline in growth and large financing needs as well as weakening the naira.
Already, Nigeria is under pressure from the World Bank to unify its foreign exchange rates as part of conditions for obtaining a credit facility of $1.5 billion from the global lender.