Valentine Ozigbo is struggling to obtain a key construction ingredient as he refurbishes and builds hotels in Nigeria: the U.S. dollar.
Some of Africa’s largest economies, including Nigeria, Angola, Ethiopia and Mozambique, are restricting access to the greenback to protect dwindling reserves. That is causing problems for businesses from Mr. Ozigbo’s Transcorp Hotels to international giants like General Electric Co. and Coca-Cola Co. , all of which are struggling to get the dollars they need for imports or to send profits back home.
The shortage comes as the inflow of dollars from resource exports, from oil to cotton, has plummeted with the prices of these commodities. The commodity rout also is putting pressure on local currencies, which some central banks are trying to support with their dwindling supply of dollars.
This dollar squeeze is frustrating investors, increasing costs and delaying projects. It may hamper future investment in countries reeling from the fall in commodity prices.
“It’s been a rough ride for a lot of companies in Nigeria, if not all the companies,” said Mr. Ozigbo, chief executive of Transcorp Hotels.
Nigeria gets more than 90% of its foreign-currency reserves from oil exports. Since June 20, 2014, when the U.S. oil price was at $107.26, the U.S. oil price has declined 66% through Tuesday’s close of $36.14, amid oversupply and weak growth in demand.
Oil’s decline sent the value of the naira, Nigeria’s currency, sharply lower at the start of the year. In March, the Central Bank of Nigeria fixed its exchange rate at around 199 naira to the dollar. By this month, its currency reserves were down 18% to $29.5 billion from the same month last year.
In the summer, the central bank introduced a list of 41 items, from meat to concrete, that it won’t release dollars for. But no matter what a buyer wants their dollars for, their request has to be vetted against this list, slowing down any attempt to buy the currency.
Angola now lists industries—including the oil and food sectors—that have priority for the country’s dollar reserves, In Mozambique, the government requires companies to convert half of any dollar revenues into the local currency, as it looks to shore up its reserves.
“It’s obviously not like it used to be, where you would go to the bank and get your dollars,” said Jay Ireland, the Africa chief executive officer for GE. “Now it’s a process that they require and it takes longer,” he said, talking about Nigeria and Angola.
Mr. Ireland said GE remains committed to long-term projects in Africa, but the dollar shortage means that it now takes local clients longer to buy GE products priced in dollars.
Coca-Cola has been in Africa for almost a century and can obtain dollars from across its businesses. Still, the beverage giant is concerned that its suppliers will start to feel the pinch as they struggle to fund imports that they need. “If there are no changes in monetary policy it might become a bigger challenge and that is a space we are watching very closely,” said Adeola Adetunji, Coca-Cola’s managing director in Nigeria. “Business is not as usual.”
Mr. Ozigbo’s Transcorp needs dollars to pay contractors and to import building materials to upgrade one hotel and build another, among other construction projects.
Last year, getting a “sizable amount” of dollars would have taken 48 hours to a week, Mr. Ozigbo said. Now, Transcorp is lucky if it can obtain the money within three weeks, he said.
Amid delays, the cost of upgrading the Hilton in Abuja has ballooned from an estimated 16 billion naira ($79 million) to about 26 billion naira since last year.
Mr. Ozigbo now has serious doubts about whether his project will remain economically feasible.
Companies are looking for ways to get around the shortage, particularly by buying more local products, which typically don’t need dollar payments. “It’s a natural hedge,” said Mr. Ireland.
An official at the central bank of Nigeria said complaints about dollar scarcity aren’t surprising, but the blame should be placed on the falling oil price rather than the bank.
Angola, which is Africa’s second-biggest oil producer after Nigeria, has also been using its dollars to prop up its currency, the kwanza. Its central bank says it plans to stay on that course.
“If we devalue, it will have a huge impact on inflation because most of our food is imported,” said Gualberto Lima Campos, deputy governor for the Central Bank of Angola.
The country has a 14% annual rate of inflation.
But as African central banks place restrictions on access to their dollars, while burning through these reserves to support their currencies, they are also storing up longer-term troubles.
“Few investors will want to put money into a country at an official exchange rate that is not set by the market and which is not seen as sustainable in the long run,“ said Charles Robertson, global chief economist at investment bank Renaissance Capital.