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Dollar scarcity, key challenge to Nigerian companies –Moody’s

By on November 18, 2016

Global rating agency, Moody’s Investors Service, on Wednesday said the scarcity of United States dollars remained a key challenge to companies operating in Nigeria.

As a result, Moody’s said foreign capital inflows into Nigeria would unlikely rebound strongly due to the existence of a huge gap between the parallel and official markets rates of the dollar.

In a new report released on Wednesday, the rating agency said investors would not invest capital into Nigeria as long as there was uncertainty around the propensity for a further devaluation of the naira against the US dollar.

The report was entitled, ‘Corporates Nigeria: US dollar scarcity remains key challenge to improvement in the corporate sector.’

The Vice-President, Moody’s, Aurélien Mali, said, “Nigeria is still undergoing a severe economic realignment to adjust to lower oil prices and the knock-on effect on its US dollar oil exports, which have led to reduced US dollar supply and lower GDP growth.”

A Moody’s Assistant Vice-President and the report’s co-author, Douglas Rowlings, was quoted to have said, “The naira’s depreciation by nearly 60 per cent in June partially cleared accumulated US dollars demand and stabilised foreign currency reserves. However, access to the US dollars through official channels remains challenging for some companies.”

Moody’s expects foreign investment inflows to continue to be constrained until the parallel market rate of the naira against the US dollar moves closer to the official rate.

According to the report, the supply of the US dollars will improve over time as real growth rates pick up, which will be supported by investment by multinational corporates wishing to further strengthen their domestic position in Nigeria or establish a presence in the country.

 

[Punch]