Economy
Naira Shortage Threatens Nigerian Businesses—Report
By Modupe Gbadeyanka
A report published by Bloomberg has revealed that Nigerian businesses are now battling with shortage of Naira, after overcoming the worry of getting Dollar to carry out their operations.
The article titled ‘Unintended Result of Nigerian Dollar Hunt Is Naira Shortage’ and published on Thursday, September 21, 2017, stated that a central bank requirement that companies back forward dollar purchases with naira is drying up supplies, helping to underpin a 2.1 percent gain since the local currency fell to a record low against the greenback on Aug. 9.
At the same time, an increase in government borrowing is spurring banks to invest in the safety of sovereign debt rather than lending to businesses or consumers, also draining cash out of the system.
Some banks demand naira deposits of as much as 1.5 times the amount of dollars sought in the 60-day forwards market to guard against fluctuations in the currency, said Ayodeji Aboderin, chief financial officer for May & Baker Nigeria Plc, a Lagos-based pharmaceutical and food processing company. That is pressuring the company’s own cash flow, he said. The difference is returned to the company on the delivery of the contracts, with the amount depending on how the currencies have moved.
“Money you would have used as working capital will be taken upfront by the bank,’’ Aboderin said. “Last year, it was more of dollar illiquidity. This year, it is naira illiquidity.”
May & Baker, which is building the country’s first vaccine plant, is responding by cutting production at its water-bottling and instant-noodle units, and focusing on more profitable pharmaceutical lines, Aboderin said. Interest rates on loans have also soared to as high as 25 percent, more than double the rate May & Baker is comfortable paying, he said. Nigerian inflation eased to 16.05 percent last month after reaching a record 18.7 percent in January.
Within Limits
The currency rule, introduced in January, is one of a series of measures aimed at managing dollar flows after a decline in the price and output of crude oil, which accounts for about two-thirds of government revenue. The regulator sells dollars directly to lenders on an almost weekly basis, which then supply these to their customers.
By depositing cash with lenders, companies are able to assure the regulator that they have the money to buy the foreign currency, said Yinka Sanni, chief executive officer for Stanbic IBTC Holdings Plc. The amount of naira required depends on the customer’s balance sheet strength, he said.
“It is within the rules. It is a product that is acceptable and endorsed by the regulator,” Sanni said. “No bank is doing anything outside the rules. If they were, the CEO would have been cautioned by the central bank.’’
A spokesman for the central bank didn’t respond to calls and emailed messages seeking comment. The naira was down 1.25% at 361.5 per dollar in the interbank market as of 16.13 p.m. in Lagos on Thursday.
Limiting Access
Special auctions that are being used by the central bank to make “massive injections of cash” to the government, effectively raised banks’ cash-reserve requirements beyond the stipulated 22.5 percent, said Monetary Policy Committee Doyin Salami, who has previously been critical of the policies of Governor Godwin Emefiele.
“We thus find ourselves at a point where government borrowing from the central bank is neutralized by raising the cash-reserve ratio of banks, thereby limiting private-sector access to credit,” Salami said after the monetary policy committee’s July 24-25 meeting, according to a central bank statement published Tuesday.
Nigeria sold 364-day bills at a yield of 17 percent and 182-day securities at 16.8 percent at an auction on Wednesday, according to the regulator.
“The Central Bank of Nigeria’s efforts have in many ways helped stabilize the foreign-exchange market,” said Omotola Abimbola, a banking analyst at Afrinvest West Africa Ltd. in Lagos. “But the unintended consequence has been that banks have restricted credit extension to the private sector due to the high yields on government securities as well as low risk appetite.”
Growth in credit extended to the private sector slowed to 0.9 percent this year through July, compared with 19.8 percent in 2016, according to central bank data. Policy makers need to tackle a lot more than dollar liquidity to bolster economic growth and reduce the country’s dependence on oil, Abimbola said. This would include easing monetary policy by lowering interest rates from a record high, addressing infrastructural shortcomings, such as road, rail and power, and improving the productivity of state institutions, he said.
Nigeria’s economy expanded 0.55 percent in the three months through June, ending five straight quarters of contractions that saw gross domestic product shrink 1.6 percent in 2016, the first drop since 1991. The improvement came after oil output increased and authorities boosted the supply of foreign currency needed by manufacturers to import supplies.
Flour Mills of Nigeria Plc, the country’s biggest miller by market value, is planning to issue as much as 40 billion naira in bonds next year and is also considering a rights issue to enable it to deal with funding challenges arising from a scarcity of naira and high interest rates, Managing Director Paul Gbededo said.
“Continued tightness in the market will keep interest rates high,” said Pabina Yinkere, an analyst at Vetiva Capital Management in Lagos. “High interest rates increase the probability of default and make banks cautious in growing loans, particularly to SMEs. If banks do not lend it affects overall economic activity and stalls growth.’’
Source: Bloomberg
By Aduragbemi Omiyale
The Stanbic IBTC Bank Nigeria Purchasing Managers’ Index (PMI) for the Nigerian private sector in July 2026 contracted to 52.5 points from 53.4 points in June 2026, a statement made available to Business Post has shown.
This occurred despite the business environment sustaining its growth last month, with an increase in new orders experienced, as inflationary pressures softened, and output and employment modestly rising.
The Head of Equity Research West Africa at Stanbic IBTC Bank, Mr Muyiwa Oni, said the PMI indicated that the private sector recorded its slowest since March 2026, as businesses also increased their input purchasing activity to keep up with current demand requirements and prepare for future workloads.
“Nigerian businesses reported improved customer demand in July while better pricing and new product launches also helped them to capture new orders arising from the increase in demand. These factors helped to keep the private sector activity in an expansionary territory, although this moderated when compared to June,” he was quoted as saying.
It was stated that while input costs increased at their slowest pace in five months, panellists reported higher costs for fuel and raw materials. Selling prices also softened in line with the picture for input costs in July.
Headline inflation eased slightly to 15.91 per cent y/y in June from 15.93 per cent y/y in May, snapping three consecutive months of price increases.
Although July inflation is likely to be higher m/m, it is expected to print lower, likely at 15.72 per cent y/y, primarily driven by favourable base effects from the corresponding period of last year, because there are no expectations of the magnitude of m/m inflation witnessed in July 2025 (1.99 per cent) to materialise this year.
“We retain our 2026 growth forecasts at 4.1 per cent as we see the oil sector growing by 3.45 per cent y/y in 2026, from 8.50 per cent y/y in 2025, while the non-oil sector is likely to grow by 4.11 per cent y/y, from 3.71 per cent y/y in 2025.
“The risks to our outlook include country-wide insecurity which may constrain food production, exchange rate pressures resurfacing, extreme-weather related conditions and higher fertiliser prices impacting crop yield, and a volatile global environment which may affect sentiment and constrain capital flows,” Mr Oni noted.
By Adedapo Adesanya
Sahara Upstream, a Nigeria-focused crude producer, has deployed a new 380,000-barrel tanker to boost exports from the OML 18 block as part of a wider push by domestic operators to invest in infrastructure and lift output and exports for Africa’s biggest oil producer.
The MT D Adesanya, which can hold more than 62,000 cubic metres of crude, will operate alongside the MT D Bayero, receiving crude from shuttle vessels at Bonny Anchorage, one of Nigeria’s main crude export hubs, before transferring it to the FSO Cawthorne storage facility.
Sahara said the tanker would help cut turnaround times, currently about 30 to 48 hours, and support a planned 50 per cent increase in exports from the block’s current level of about 950,000 barrels per month.
The block currently produces about 36,000 barrels per day, according to data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), with Sahara targeting output of 60,000 barrels per day.
OML 18 is one of the Niger Delta’s oldest producing assets. It began production in 1970 and contains an estimated 1.5 billion barrels of oil equivalent in reserves.
Shell, Total and Eni sold their combined interests to Eroton in 2015 as part of a broader shift toward domestic ownership in Nigeria’s upstream sector.
This development comes as Sahara Upstream is deepening its exploration and production footprint through Asharami Energy Limited (AEL), its upstream E&P business, which says it is targeting 350,000 barrels of oil per day by 2030 through its subsidiary, Enageed Resources Limited (ERL).
The growth target comes as AEL also marks a major safety milestone, achieving 6 million Lost Time Injury (LTI)-free man-hours in its OML-148 operations — reinforcing the company’s commitment to operational excellence and safety leadership.
According to Asharami Energy, the milestone reflects its ability to execute complex operations safely, in line with Sahara’s Beyond XXX vision, which builds on the group’s 30-year legacy of responsible enterprise while marking its next chapter of impact, innovation, and sustainable growth.
The developments position Sahara Upstream and its subsidiaries among the domestic operators driving increased investment in Nigeria’s oil and gas infrastructure, as the group works to scale up production and exports for Africa’s biggest oil producer.
By Aduragbemi Omiyale
One of the leading energy firms in Nigeria, Aradel Holdings Plc, has expressed its desire to optimise its enlarged portfolio and improve operational efficiency in the second half of 2026.
The company is planning to build on the success it recorded in the first half of the year, where it grew its revenue by 577 per cent to N2.5 trillion from N368.1 billion in H1 2025.
The significant rise in earnings was driven by higher production volumes together with stronger realised crude oil and gas prices, with the average at $90.4/bbl and $2.08/mmscf, respectively.
In the period under review, the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) increased by 688 per cent to N1.4 trillion from N176.4 billion in the corresponding period of last year, while the operating profit surged by 789 per cent to N1.1 trillion from N118.6 billion due to higher revenue and crude handling income at N149.8 billion, partly offset by underlift cost and general and administrative costs.
The net cash generated from operations was N975.6 billion between January and June 2026 versus N140.8 billion in the same period of 2025, reflecting the cash generation of the enlarged organisation.
The net debt contracted by 70 per cent on a year-to-date basis to N46.5 billion from N475.1 billion as of December 31, 2025.
Aradel, in the period under consideration, improved its post-tax profit by 30 per cent to N191.0 billion from N146.4 billion, a development that impressed its chief executive, Mr Adegbite Falade, who said, “A firmer price environment supported performance, generating net cash from operating activities of N975.6 billion and a closing cash balance of N1.7 trillion.”
“Our enlarged portfolio provides more opportunities to generate stronger cash flow and returns for shareholders and unlocking that potential is our main focus.
“We reaffirm our full year production guidance of 110 – 140 kboepd and remain committed to operating responsibly in a changing energy landscape and to delivering lasting value for our stakeholders,” he stated.
