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Nigeria’s central bank still short of funds to clear forex backlog— Fitch Report

Published

3 months ago

January 19, 2024

Fitch, a global credit ratings agency, has said that Nigeria’s Central Bank is still having trouble getting enough funds to clear its foreign exchange backlog.

Last week, the Acting Director of Corporate Communications of Nigeria’s Central Bank, Hakama Sidi-Ali, claimed the country had settled almost $2 billion of forward liabilities in the past three months, following the bank’s announcement in September of plans to clear the approximately $10 billion foreign exchange backlog in two weeks. But Fitch’s latest revelation suggests not much has really been achieved.

The naira would be under pressure due to Nigeria’s chronic shortage of foreign exchange, according to Gaimin Nonyane, Director of Fitch’s Middle East and Africa Sovereigns. She said, “We think that the central bank is still very short of the amount it needs to be able to clear the foreign exchange backlog and also meet the extremely large external financing by the private sector.”

The country’s high debt-to-revenue ratio is also contributing to a challenging sovereign credit rating. As of Thursday, the difference between the official and alternative exchange rates is 30%.

Fitch’s Head of Middle East and Africa Sovereigns, Nonyane, and Toby Iles issued a warning, pointing out that Nigeria’s interest payments-to-revenue ratio—which is more than 40%—poses a serious risk to its credit rating, since it is four times higher than the median for B-rated sovereigns.

Iles said that since 2014, interest-to-revenue ratios in Africa had more than doubled, primarily as a result of higher borrowing costs and rising expenses brought on by increases in global interest rates.

The pressure on Nigeria’s currency, the naira, which has lost more than 50% of its value on the official window since the FX market’s unification on June 14, 2023, is anticipated to be relieved if the clearing of the backlog is achieved. Yemi Cardoso, the governor of the CBN, estimated during his Senate confirmation hearing that at least $7 billion was due to foreign businesses doing business in Nigeria.

Despite a plethora of macroeconomic problems, including record-high inflation, a faltering currency, and weak crude oil production, Fitch rated Nigeria at B- with a stable outlook.

Related Topics:CBN Featured Foreign exchange FX Nigeria

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Nigeria wants managers for proposed $10 billion diaspora fund

Published

5 hours ago

April 28, 2024

Ifeoluwa Dada

A tender paper shows that Nigeria is looking for fund managers for a $10 billion diaspora fund to bring in dollars and foreign investment for the economy.

The fund wants to pool the billions of dollars that its people send back to the country every month so that they can be used for local investments in things like healthcare, education, and infrastructure.

The World Bank says that Nigeria got more than $20 billion in payments from people living outside of Nigeria last year.

The Ministry of Industry and Trade in Nigeria said in a public post that it was looking for “fund managers for the development and establishment of a multisectoral, multilateral private sector-led investment fund to form the $10 billion Nigeria Diaspora Fund.”

The tender paper said that the fund manager’s job is to plan and set up the fund’s legal, operational, financial, and administrative structures.

The investment is intended to last for three to five years, and then more money will be put in after that. The government said the fund would last for 10 years and could be used for an extra two years.

The trade ministry’s tender said that people who want to run the fund must have done business in Nigeria in the last five years and must have a track record of raising money and running big, profitable venture capital funds.

Anglo-American turned down BHP Group’s $39 billion takeover offer on Friday, saying it was way too low for the London-listed company and its future.

In a statement, Minister of Industry and Trade Doris Anite said that it was a “once-in-a-lifetime chance for our citizens in the diaspora to drive Nigeria’s economic growth.”

The naira is under pressure because of a lack of foreign currency because of lower crude oil exports. This has led companies and people to buy dollars on the black market.

Nigeria is going to issue migrant bonds later this year to bring in even more foreign currency.

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World Bank grants Malawi $57.6 million for food crisis

Published

1 day ago

April 27, 2024

Ifeoluwa Dada

As a response to its food crisis, the World Bank said on Friday that it would give Malawi $57.6 million in “quick release” grants.

“This support comes in the context of the severe food crisis the country is suffering due to El Niño conditions in the wider southern Africa region,” the World Bank said in a statement.

“A series of intense disaster events over the last few years has left almost no time for the country to recover and has resulted in a severe erosion of food security at the national level.”

Malawi is one of the least developed countries in the world. It is ranked 170 out of 187 countries in the 2010 Human Development Index. Almost 16 million people live there, and 90% of them make less than $2 a day. That’s 53% of the total population.

The United Nations Children’s Fund (UNICEF) says that 46,000 children in Malawi are seriously malnourished. In 2023, UNICEF said that more than 500,000 Malawian children were at risk of not getting enough food.

Now, Malawi has a lot of programs in place to deal with things like poverty, and climate change, and to make the business and agriculture more diverse.