The Central Bank of Nigeria’s ban on
importers of some items from accessing foreign exchange from the
official forex market has made it difficult for a number of Nigerian
companies to pay their overseas vendors, it has been gathered.
The development has made banks in the
country, which are the guarantors of those payments, to owe their
counterparts abroad between $3bn and $4bn, several top bank executives
disclosed to our correspondent on Wednesday.
A top executive of one of the
‘Systemically Important Banks’ in the country, who chose to speak on the
condition of anonymity because of the sensitivity of the matter,
explained, “Nigerian banks currently owe a combined sum of about $4bn in
outstanding settlements for credit lines extended to them by foreign
banks.
“The debts have mounted this far because
Nigerian companies that imported goods from overseas could not purchase
dollars from the CBN’s official window to pay the local lenders, which
will in turn credit the accounts of the foreign banks.”
The CBN had some months ago banned
importers of 41 items from accessing dollars from the official forex
market as part of measures aimed at preserving the external reserves
from further depletion and thereby stabilise the naira.
The
forex policy has attracted strong reactions and criticisms from
companies and stakeholders, including the Lagos Chamber of Commerce and
Industry, which said the CBN’s action would lead to massive factory
closures and job losses.
The Director-General, LCCI, Mr. Muda
Yusuf, argued that a significant number of the 41 items banned from the
official forex market constituted major raw material inputs for many
manufacturers, and as such, their exclusion from the forex market would
jeopardise the continued operations of many companies.
Yusuf, who noted that firms had
defaulted on contracts and lost credit lines, said, “Many companies have
defaulted in fulfilling foreign obligations … even blue chip companies …
for the first time.”
The LCCI DG noted that companies had
also suffered from the CBN’s attempt to stop the dollarisation of the
economy, adding that a ban on foreign currency cash deposits had forced
firms to use informal “transfer markets,” whereby people abroad wire
dollars on companies’ behalf.
The President, Manufacturers Association
of Nigeria, Dr. Frank Jacobs, stated that a breakdown of the 41 items
excluded from the forex market by the CBN had actually led to over 600
items in total being shut out.
Both the LCCI and MAN have urged the CBN to review the ban on the 41 items by cutting down on the number.
The CBN has yet to accede to the
request. Instead, some stakeholders have speculated that the central
bank is tinkering with the idea of extending the ban to other imported
items in order to preserve the foreign exchange reserves.
Top bank executives told our correspondent that most banks had cut credit lines to importers.
However, they said that the challenges
some of the importers were facing had to do with the fact that they had
the naira equivalent of the amounts they owed their foreign vendors but
could not buy dollars from the CBN window due to the ban.
A top official of a tier-1 bank
explained, “Some of these importers imported the items when the dollar
was going for certain rates. The naira later depreciated and the dollar
went up. But they still need to buy the dollar at the CBN window to pay
the banks so that the banks can in turn pay the foreign lenders. They
may not source this money from the black market for a number of reasons.
So, it is really a dilemma.
“I think the economy is in a very
serious situation. If the CBN should sell dollars to all these people,
it means the external reserves will be depleted by $4bn. How many months
of fuel imports can the remaining reserves cover then? I think the
economy is at a major point and that is why I don’t even envy the CBN
now.”
Commenting on the development, a
financial expert and Chief Executive Officer, Cowry Assets Management
Limited, Mr. Johnson Chukwu, said the CBN needed to carry out a guided
depreciation of the naira so that the mounting debts would not destroy
the credit rating of the country and the affected banks and companies.
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