Bitcoin

The persistent scarcity of foreign exchange may force the Nigerian central bank to delay repaying the $10.4 billion owed to local banks, analysts at Moody’s Investors Service have concluded. The central bank’s failure to pay its debts on time will likely force the affected financial institutions to similarly delay paying back their own forex-denominated debts.

Nigeria’s Declining Oil Revenues

Nigeria’s perennial shortage of foreign exchange may likely result in the country’s central bank failing to repay domestic lenders on time, the rating agency Moody’s Investors Service has said. As reported by Bloomberg, the Central Bank of Nigeria (CBN) owes the West African nation’s so-called rated commercial lenders about $10.4 billion which the bank received in the form of swaps and forwards.

According to Moody’s analysts that include Mik Kabeya and Lynn Merhi, the anticipated central bank debt repayment delay may similarly force the affected banks to delay settling their own offshore obligations.

“A material delay in repayment could well lead to the banks facing their own foreign-currency shortages and could constrain their ability to repay their own foreign-currency liabilities,” the analysts reportedly said.

Despite being one of Africa’s biggest oil producers, Nigeria’s oil revenues have gradually declined from a peak of $62 billion seen in 2008 to $36.6 billion seen by December 2022. This sharp drop in revenues, which is blamed on oil theft and vandalism, has in turn increased pressure on Nigeria’s forex reserves.

Persisting Local Currency Shortages

The prospect of the CBN delaying repayment its debts comes at a time when Nigeria is also grappling with shortages of local currency. The shortages stem from the CBN’s so-called naira redesign policy — an initiative which, in part, seeks to starve the country’s forex of naira banknotes.

However, reports and scenes of Nigerians storming and vandalizing banks eventually forced the country’s president, Muhammadu Buhari, to extend the life of the recently demonetized naira banknotes. In his televised address to Nigerians on Feb. 16, Buhari said he had extended the life of the old 200-naira notes by 60 more days.

In the address, President Buhari insisted the naira redesign policy is a necessary step that had to be taken in order to strengthen the monetary policy. The Nigerian leader also cited money laundering and terrorism funding concerns as some of the reasons why he okayed the CBN’s currency demonetization exercise.

Register your email here to get a weekly update on African news sent to your inbox:

Tags in this story

What are your thoughts on this story? Let us know what you think in the comments section below.

Terence Zimwara

Terence Zimwara is a Zimbabwe award-winning journalist, author and writer. He has written extensively about the economic troubles of some African countries as well as how digital currencies can provide Africans with an escape route.














Image Credits: Shutterstock, Pixabay, Wiki Commons

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

Read disclaimer

Articles You May Like

Truss legacy weighs on Tory economic standing, poll shows
US stocks hit record high on cooling inflation data
In charts: the legacy of 14 years of Conservative rule
Wells Fargo fires workers for ‘simulating’ being at their keyboards
Greens pledge to raise taxes on wealthiest 1% as party unveils manifesto