Nigeria’s Dollar Squeeze Gets Tougher as Companies Opts Export for Survival

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  • Dangote Cement has about 1,500 trucks delivering across border
  • Diageo considers shipping Guinness stout to South Africa

Nigeria’s dollar squeeze is forcing local and international companies to consider exports for business survival.The squeeze which was exacerbated by the central bank opting to keep a tight grip on the naira’s value.

Meanwhile Diageo Plc’s Nigerian unit said it was considering shipping products including Guinness stout to South Africa, while imported clothing entrepreneur Chris Aniagolu is talking to local factories about bulk purchases of shoes he’ll export to other West African countries.

Exports are a helpful source of dollars for Dangote Cement, controlled by Africa’s richest man, Aliko Dangote, as it struggles to access foreign exchange needed to pay for imported raw materials and equipment, Van Der Weijde said. Dangote’s struggling to maintain its plants, he said, and the company has signaled expansion plans may take longer because of the foreign-exchange shortage.

Investors say the bank has held it at around 315 against the dollar on the official market since August, even as the black market rate tumbled to 380.

Companies in Nigeria are struggling after the decline in oil prices cut government revenue and caused a shortage of foreign currency, causing the economy to shrink last year for the first time since 1991.

The central bank has also blocked importers of 41 selected goods including textiles from the interbank foreign-currency market. The lack of dollars has forced businesses like Aniagolu’s to buy foreign currency on the black market at about 25 percent more than the official rate.

Exports aren’t the only route being pursued by struggling Nigerian companies. GlaxoSmithKline Plc’s local unit is seeking to buy more items locally to help reduce the need for foreign currency. Dangote is also reducing its reliance on natural gas, the price of which is linked to the dollar despite being sourced locally from the Niger River delta. Instead, the company is using more domestically mined coal to fire its kilns.

Moving to China

For Erisco Foods Ltd., a Nigerian tomato-processing company, the solution was more drastic. Erisco is closing its $150 million Lagos factory and moving to China, CEO Eric Umeofia said in November. Management was frustrated by higher costs and a scarcity of dollars that eroded profit, the executive said.

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