Nigeria’s central bank seen unable to halt naira slide
LAGOS: Looking at laptop cables stashed at his shop in Nigeria’s biggest IT market, wholesaler Emmanuel Gabriel wonders how long he can survive the hard currency shortages that are paralysing Africa’s biggest economy.
The central bank had entrepreneurs like him in mind when abandoned an overvalued naira peg last month as low oil exports, the country’s lifeline, have hammering the currency and public finances.
The bank hoped that allowing the currency to lose a third of its value would attract investment and erase the need for a black market, where the naira has fallen versus the dollar some 40 per cent. But a month since the float Gabriel and most vendors in the market still have to buy dollars for a premium to import the laptops, TV sets and computer software they sell.
They will be looking to central bank governor Godwin Emefiele for answers on how to address a worsening shortage of dollars at a news conference on Tuesday.
“We thought it (the float) would affect the price of forex in Nigeria but instead of coming down it went up,” said Gabriel, sitting in his one-room store in Lagos’s Computer Village, home to hundreds of IT shops.
“When you call the banks they say there are no dollars so we go to the black market,” he said. “Today we sell a product for 4,000 naira, tomorrow for 5,000.”
He has been increasing prices by more than 20 per cent but is unable to pass on the full devaluation as customers struggling with annual inflation jumping to a decade-high of 16.5 per cent in June would stay away. The economy is on brink of recession.
“All shops make losses here. We are just trying to hang on,” said Ngozi Belolise, another computer vendor who just laid off half of his staff.
The central bank removed a 197 naira peg a month ago but has been unable to maintain an initial rate of 280.
Worse looks set to come after the naira accelerated losses at the end of the week. On Friday, the central bank sold dollars on the interbank currency market after the rate fell to a record low of 331 naira per dollar, traders said. The naira firmed to 300 per dollar after the intervention.
“It’s terrible, really terribly,” said Idowu Alashande who was looking for laptops and printers. “We are getting them for a very high rate, like times three or times five of what we used to buy.”
The central bank had hoped the new trading system, where the rate is based on demand, would inject dollars from commercial banks, oil majors or foreign investors. But liquidity on the official trading window remains limited with the naira moving on some days on a single trade.