27 January 2017, Sweetcrude, Abuja – The Central Bank of Nigeria (CBN) has called on all commercial banks in the country to submit the backlog of dollar demands from fuel importers, airlines, manufacturers of raw-material and agricultural chemicals and machinery for manufacturers.
The CBN in a memo to the banks asked the banks to bid in a special currency auction to clear the buildup of dollar obligations owed the operators in the various sectors.
Although they did not specify the amount of dollar to be sold to the banks, some of the traders who spoke on the issue quoted the apex bank as saying it would hold a retail foreign exchange auction yesterday to sell two- to five-month dollar forwards to clear the outstanding dollar demands.
The CBN had in October last year approved a Special Secondary Market Intervention Retail Sales (SMIS) for airlines operating in the country.
The Central Bank governor, Mr. Godwin Emefiele, had on Tuesday denied allegations that the bank was allocating dollars to end users, saying request for foreign exchange were made through their banks.
He however said the bank would increase dollar allocation to the banks and licensed bureau de change (BDC) operators with special consideration to manufacturing industries that need to import raw materials and spare parts in a bid to discourage a situation whereby street currency traders determine its rate to the dollar.
Meanwhile, Fitch Ratings, an international economic rating agency on Wednesday recanted earlier forecast for the Nigerian economy, predicting negative growth for the country in 2017.
Announcing the revision of the outlook on Nigeria’s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) to negative from Stable in last October, Fitch affirmed the IDRs at ‘B+’, while the issue ratings on the country’s senior unsecured foreign currency bonds were affirmed at ‘B+’.
Noting that the economy contracted through the first three quarters of 2016, Fitch estimated GDP growth of 1.5 per cent in 2016, as a whole.
“We expect a limited economic recovery in 2017, with growth of 1.5 per cent well below the 2011-15 annual growth average of 4.8 per cent. The non-oil economy will continue to be constrained by tight foreign exchange liquidity. Inflationary pressures are high with year-on-year CPI inflation increased to 18.5 per cent in December.
“Access to foreign exchange will remain severely restricted until the Central Bank of Nigeria (CBN) can establish the credibility of the Interbank Foreign Exchange Market (IFEM) and bring down the spread between the official rate and the parallel market rates. The spot rate for the naira has settled at a range of N305-N315 per USD in the official market, while the bureau de change (BDC) rate depreciated to as low as N490 per USD in November 2016.
The rating agency affirmed the African largest economy’s Ceiling at ‘B+’ and the Short-Term Foreign; leaving the Local Currency IDRs at ‘B’.
According to the rating agency, the revision of the Outlook on Nigeria’s Long-Term IDRs reflects was measured by key rating drivers of Tight FX liquidity and low oil production which contributed to Nigeria’s first recession since 1994.
Although Fitch said the economic outlook remains well below the ‘B’ median of 56%. “The country’s low revenues pose a risk to debt sustainability,” it stated, adding that “Gross general government debt stands at 281% of revenues in 2016, above the ‘B’ median of 230%.
Nigeria’s government debt is 77% denominated in local currency, which makes it less susceptible to exchange rate risk, but the share of foreign currency debt is increasing.
Additionally, the government faces contingent liabilities from approximately USD5.1bn in debt owed by the Nigeria National Petroleum Corporation to its joint venture partners. Fitch forecasts that Nigeria’s general government fiscal deficit will remain broadly stable in 2017, at 3.9% of GDP, just below the ‘B’ category median of 4.2%.”