Nigeria's Forex Rationing Forces Companies To Buy Dollars At High Rates

Large companies in Nigeria are being compelled to buy dollars above the market rate as the rationing of foreign exchange by the CBN has led to a  shortage of greenback.

At an investor conference call in Lagos on Thursday, Adesola Sotande-Peters, finance director of Unilever Nigeria Plc said that the company bought the US currency at an average of N440 to N450 from money changers and lenders in the first half of the year.

Nigeria, Africa’s biggest crude producer, has been rationing dollars as the pandemic-induced slowdown, and a slump in oil prices put pressure on reserves. That’s increasing costs for some companies, while others such as Bua Cement Plc are cutting imports. Reserves have dropped about 5% this year to $33.6 billion as of Aug. 10.

Last month, the Central Bank of Nigeria stopped the sale of foreign exchange to money changers, sucking out $5.72 billion of the country's annual supply.

Unilever hasn’t seen an increase in dollar supply since the central bank’s latest policy, Sotande-Peters said. “We are still waiting to see how liquid banks will be” to meet a lot of customers’ demand, she said.

The maker of Close-Up toothpaste and Lux soap in Nigeria, just like many other companies, needs foreign exchange to import raw materials for production. However, due to the forex squeeze, Unilever is seeking ways to source local materials