· The central bank will give higher rates to exporters, with the governor stating
· Nigerian producers will receive 10-year loans at 5% percent
Being one of the largest foreign exchange countries in Africa, Nigeria has decided to make a new plan of $200 billion in inflow for forex.
The central bank of Nigeria has devised a new strategy to entice $200 billion in inflows into Africa's largest economy: make it more appealing for producers to bring home foreign cash.
The Central Bank of Nigeria will no longer sell dollars to local banks and would instead require institutions to seek foreign currency on their own. The regulator will give long-term low-interest lending to export-oriented firms and will try to persuade exporting to return dollar revenues and deposit them in banks.
Governor Godwin Emefiele remarked that before the end of the year, “we would advise them, don't come to the central bank for international trade again.” On Thursday, he talked to the media following a meeting with the chiefs of commercial lenders.
Nigeria's central bank has struggled to increase dollar supplies and has frequently modified requirements. The current proposal is the most significant change since it ceased supplying foreign cash to money changers. The regulator, which has depreciated the currency three times since 2020 in response to a drop in crude oil prices, expects the steps to increase foreign-exchange supplies in the next three to five years.
“I'm not sure why banks will be more effective than the central bank in inducing exporters to repatriate their gains to Nigeria,” said Yvonne Mhango, Africa economist at Renaissance Capital, in an emailed answer to inquiries. “Without any indication that we would see an increase in the repatriation of revenues if the central bank” stops feeding banks, he added, the naira might drop.
According to Emefiele, the regulator established an export assistance facility that will provide manufacturers with financing for up to ten years, with a two-year moratorium and a 5% interest rate. He also stated that the central bank will prolong by a year a Covid-19 interest rate advantage that began in 2020 in order to assist producers.
DOLLAR SCARCITY
The central bank intends to make it more appealing for exporters to buy local currency and bring their offshore earnings home.
Companies have been discouraged from repatriating foreign cash to Nigeria due to a 27 percent difference in the official and parallel market exchange rates of the naira.
“We can really protect the long-term worth of our currency, as well as the stability of our exchange rate, only by increasing the productivity and earning capability of our economy,” Emefiele added.
By 4:30 p.m. in Lagos, Nigeria's commercial center, the official spot rate had fallen 0.1 percent to 416.71 nairas to the US dollar.
In July, the central bank accused money changers of exacerbating a dollar shortage and restricted deliveries to them, depriving the market of over $6 billion in supply every year. In an effort to limit dollar arbitrage, it ordered bankers to identify consumers buying foreign exchange using forged documents and make their identities public in September.
