CurrenciesMarkets

Nigeria Grappling With Forex Shortage to Clear Backlog - Fitch

Fitch announced Thursday that the Central Bank of Nigeria (CBN) is still grappling with a foreign exchange shortage needed to clear the forex backlog.

The nation’s high ratio of debt service to revenue is also adding to the difficulty of maintaining a favorable sovereign credit rating.

Gaimin Nonyane, Fitch’s Director of Middle East and Africa Sovereigns, stated that the persistent foreign exchange shortages in Nigeria are putting pressure on the naira. At present, there is a 30% difference between the official and parallel exchange rates.

“In our view, the central bank is still significantly short of the resources required to clear the foreign exchange backlog and also cater to the substantial external financing needs of the private sectors,” said Nonyane.

Increasing debt service cost across Africa

Nonyane and Toby Iles, Fitch’s Head of Middle East and Africa Sovereigns, warned that Nigeria’s ratio of interest payments to revenue, which exceeds 40%, is a major vulnerability for its credit rating – four times higher than the median for B-rated sovereigns.

Since 2014, interest-to-revenue ratios across Africa have more than doubled in Nigeria, fueled by increased borrowing and rising costs due to global interest rate hikes.

CBN has started clearing a backlog of FX forwards for companies aiming to repatriate their cash overseas. The Governor of the apex bank estimates the total backlog to be around $7 billion.

The apex bank recently announced that it has cleared approximately $2 billion of the backlog in the past three months and will ensure liquidity in the forex market.

Despite a plethora of macroeconomic challenges – record inflation, fluctuating naira, and sluggish crude oil production, Fitch rated Nigeria at B- with a stable outlook.

Nigeria’s debt levels have recently been a source of worry for many. In the first quarter of 2023, the debt service to revenue ratio rose to 183%. As of Q3, 2023, Nigeria’s total public debt stands at $98.7 billion.

In the 2024 budget proposal submitted to the National Assembly, the federal government plans to borrow $8.7 billion to cover a budget deficit of $10.2 billion.

Monitor Your Business Transaction

Lawrence Baraza

Lawrence Baraza is a dynamic journalist currently overseeing content at Metropol TV Digital. With a keen focus on business news and analytics, Lawrence guides the platform in delivering insightful, data-driven content that empowers its audience to make informed decisions. Lawrence’s commitment to quality and his ability to anticipate market trends make him a key figure in the digital media landscape. His work continues to shape the way business news is consumed, making a significant impact in the field.

Related Articles

14 Comments

  1. Heya! I just wanted to ask if you ever have any trouble with hackers?
    My last blog (wordpress) was hacked and I ended up losing a few months of hard work due to
    no back up. Do you have any methods to protect against hackers?

    My web-site blw99 (Lin)

  2. I think this is among the most important information for me.
    And i am glad reading your article. But should remark on few general things, The website style is great,
    the articles is really great : D. Good job, cheers

    My web-site – blw99 (Teresa)

  3. hi!,I love your writing very much! proportion we communicate extra
    about your post on AOL? I require a specialist in this space
    to unravel my problem. May be that’s you! Taking a look forward to peer
    you.

    Here is my blog post … blw99 (Muoi)

  4. My coder is trying to persuade me to move to .net from PHP.
    I have always disliked the idea because of the costs. But he’s tryiong none the less.

    I’ve been using Movable-type on various websites for about a year and
    am nervous about switching to another platform.

    I have heard very good things about blogengine.net.

    Is there a way I can import all my wordpress content into it?
    Any help would be greatly appreciated!

    Also visit my page blw99 – Charles,

  5. Hello are using WordPress for your site platform? I’m new to the blog world
    but I’m trying to get started and set up my own. Do you need any html coding knowledge to make your own blog?

    Any help would be really appreciated!

    my web blog :: blw99 (Florence)

  6. Pretty nice post. I just stumbled upon your weblog and wished to
    say that I have truly enjoyed browsing your blog
    posts. After all I’ll be subscribing to your rss feed and I hope you write again very soon!

    Feel free to surf to my homepage blw99

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button