The lingering scarcity of foreign exchange in the system, occasioned by the country’s dwindling external reserves, is significantly affecting the ability of businesses to access dollars needed to buy critical imports, according to a Reuters report. The news agency reported Director General of the Lagos Chamber of Commerce and Industry (LCCI), Mr. Muda Yusuf, as saying that the dollar shortage was hitting most of its 2,000 members hard. He was quoted as saying “if the situation persists it will lead to lay-offs.
If you are not producing, there will be a shortage of goods in the market, prices will go up.” The report noted that inflation had risen for 10 straight months, hitting a two-year high of 12.56per cent in June, piling on greater economic hardship for a population of whom 40per cent already live below the official poverty line of N137,430($382) per year. Added to that, there have been two devaluations of the naira’s official rate this year. With the oil market depressed by a producer price war and the pandemic-induced global recession, CBN’s external reserves have fallen 20per cent in the past year to $36.1 billion, around five months of import cover. The apex bank initially sought to stem the decline by suspending dollar auctions in March and continues to severely ration their supply.
“It’s been excruciating,” said Fred Ameobi, executive director of Coscharis Group, a conglomerate whose businesses include automobile assembly. The government says the economy could shrink by up to 8.9per cent in 2020, while many of the local banks that Nigerian companies rely on have seen their dollar credit lines halted by international lenders who fear they won’t be paid back. Many firms have resorted to the parallel market, where the naira trades at around 20per cent below the official rate, making dollar purchases even more expensive.