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FG targets non-oil exports to boost FX as recession looms

President Muhammadu Buhari

Chidi Ogbuokiri

The Central Bank of Nigeria (CBN) is trying to force non-oil exporters to process dollar proceeds through domestic lenders to increase dollar liquidity and support the ailing currency, a circular seen by Reuters showed.

The Central Bank said exporters who fail to remit dollar proceeds through the lenders will be denied access to official currency markets, the circular said.

Exporters have cited the value of the currency on the official market, where the naira is trading at a discount of around 20 per cent to the black market, as a reason for hoarding dollars or bypassing banks to take advantage of black market rates.

Exporters also sometimes conduct trade via offshore accounts.

The CBN also directed lenders to stop processing letters of credit for imports for third-party suppliers or brokers with immediate effect. That could limit imports into the country.

Nigeria, which for months has sought to shore up its dwindling reserves, posted an economic contraction of 6.1 per cent in the second quarter and expects further contractions in the third and fourth quarters, the presidency said on Wednesday.

Nigeria has been rationing dollars in recent months to conserve reserves after it moved to unify its multiple exchange rates this month to qualify for a $1.5 billion World Bank loan, which is yet to be approved.

But dollar shortages have worsened afterwards with reserves now down 11.5 per cent from a year ago. The bank has now turned its spotlight on exporters.

The central bank has proposed talks with chief executives of multinational companies in Nigeria to discuss the revamp of exports, particularly for agricultural produce, and diversifying the country away from its reliance on crude oil.

But plans face hurdles as weak growth and rising inflation hobble businesses worried about consumer demand and the impact of the coronavirus on logistics and global supply chains.

Cocoa is Nigeria’s biggest non-oil export but the sector has struggled to compete with top producers Ivory Coast and Ghana due to low yields, poor farm inputs and financing, which limits output.

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