CBN lacks capacity to clear forex backlog liability
By Abimbola Tooki
The Central Bank of Nigeria (CBN), Nigeria's apex bank, currently
lacks the capacity to clear the backlog of foreign exchange demand as the
country's high interest payment to revenue ratio weighs on its sovereign credit
rating.
This development was
revealed earlier today by Fitch Ratings Inc., an American credit rating agency and is one of the "
Nigeria, which is the Africa's largest economy has thus
far cleared just $2 billion of a backlog of some $7 billion after
President Bola Tinubu took office last year.
Tinubu took quick action on key fiscal reforms - including
slashing petrol subsidies and loosening controls on the naira to narrow the gap
between official and parallel rates.
But Gaimin Nonyane, director of Middle East and Africa
sovereigns with Fitch, said foreign exchange shortages in Nigeria would keep
pressure on the naira, where there is currently a 30 per cent gap between the
official and parallel rates.
"We think that the central bank is still very well short of
the amount it needs to be able to clear the foreign exchange backlog and also
meet the extremely large external financing by the private sectors,"
Nonyane said in a webinar.
Nonyane said Fitch expected the naira to end the year just above
900 against the dollar.
The official rate is currently at N846 to the dollar, but has
wildly fluctuated, going past N1,299 this month.
She added there had been some backtracking in fuel subsidy
elimination. Tinubu allowed prices to triple in May, but naira pump prices have
not moved since July despite global price fluctuations and significant naira
weakness.
Nonyane and Toby Iles, Fitch's head of Middle East and Africa sovereigns,
also warned that Nigeria's ratio of interest payments to revenue at above 40
per cent - four times the median for B-rated sovereigns - was a key weakness
for its credit rating.
Fitch currently rates Nigeria at B- with a stable outlook.
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