Nigeria’s dollar liquidity constraints are likely to persist for the foreseeable future, despite the recent improvements in foreign exchange earnings and availability, Moody’s Investors Service has said.
According to a report released on Wednesday, which Moody’s said was an “update to the markets” despite recent progress in foreign exchange liquidity, dollar usage in the country is unlikely to return to previous levels.
“Oil prices are highly unlikely to return to the $100 per barrel level that would lead to greater foreign exchange inflows,” Moody’s Vice President (Senior Credit Officer and co-author of the report), Aurélien Mali, said.
He noted that the oil price shock between 2014 and 2015 more than halved Nigeria’s foreign exchange earnings, with exports falling from an average of around $90bn between 2013 and 2014 to $46bn in 2015.
The rating agency noted in a statement it issued on Wednesday announcing the report that Nigeria’s non-oil sectors had struggled to adjust to limited dollar liquidity, given the high import content of inputs and the delays associated with sourcing domestic substitutes.
The statement added, “In the first quarter of 2017, the Central Bank of Nigeria began to increase the availability of foreign exchange through two new exchange rate windows and interventions in the interbank market.”