Nigeria needs to solve an acute shortage of foreign currency that is slowing economic growth if Africa’s most-populous country wants to improve its sovereign rating after being downgraded deeper into junk last week, Fitch Ratings said.
The firm downgraded Nigeria by one level to B-, six notches above default and on par with Ecuador and Angola, citing government debt-service costs, worsening external liquidity, low oil production and the expensive subsidy on imported gasoline.
Our view is that steps to ease foreign-currency liquidity and increase the credibility of the foreign exchange market” will help trigger the conditions that will “be a positive for the sovereign rating,” Jermaine Leonard, director at Fitch, said in an emailed response to questions. Such a move “would be
supportive of improved macro stability, higher non-oil growth and lower vulnerability to external shocks.”
The Central Bank of Nigeria rations the supply of the greenback, making it difficult for investors to repatriate profits and for local producers to import raw materials and pay foreign suppliers.
Meanwhile there are speculations in some quarters that following the redesigning of the Naira notes, the naira might appreciate substantially against the dollar.
The Chairman of the Economic and Financial Crimes Commission, EFCC, Abdulrasheed Bawa said this in an interview with Deutsche Welle, DW, Hausa service recently.
He said, “The law says the redesigning of Naira notes should be done every eight years but we spent 20 years without any changes on them. And that resulted to 85 per cent of money are in circulation not in banks, when CBN came up with this redesigning, dollar moved to 880 and later dropped to 680 or thereabouts.
“So you see with this redesigning dollar may massively fall, who knows probably to ?200.”
The EFCC chairman also said there is no any political reason behind the notion and called on Nigerians to report any person with siphoned monies.
“There is no political motive in this; some people siphoned and hid public funds that is why we want them to bring them out and nobody says they should not bring them, what government says is let them deposit such money in banks.
“We assure Nigerians that we are always ready to receive reports of any person with suspicious hidden money and if investigated to be true, we will give 5 per cent of the money to them,” he added.
With Reports From Bloomberg