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 presidential candidate of the Labour Party in the 2023 general elections, Mr Peter Obi, has expressed worry over plans by the administration of President Bola Tinubu to spend about $11.6 billion on debt servicing.
In a post on his social media platform on Monday, the opposition politician criticised this move, saying it is not good for the country.
He also said this action “should concern anyone interested in the country’s economic future and long-term development.”
The former Governor of Anambra State kicked against the penchant of the government to borrow from various sources without anything to show for it.
“There is nothing inherently wrong with borrowing when it is guided by prudence and directed toward productive investment, he noted, stressing that countries such as Japan, the United Kingdom, the United States, the United Arab Emirates, Singapore, and Indonesia are all heavily indebted, yet their borrowings are largely channelled into education, healthcare, infrastructure, and innovation – sectors that generate long-term economic returns and sustain repayment capacity.”
According to him, “despite high debt levels, their obligations remain more manageable because they are tied to measurable productivity.”
He said, “Nigeria’s situation, however, is markedly different. A huge proportion of past borrowing has been directed toward consumption, with limited visible or sustainable developmental outcomes to justify the scale of indebtedness.”
“It is also important to note that a huge portion of the debt currently being serviced was accumulated under the Tinubu administration itself, while borrowing has continued at a significant pace. The administration’s recent external borrowing alone includes about $6 billion (from First Abu Dhabi Bank in the UAE—$5 billion, and UK Export Finance via Citibank London—$1 billion), a further $1.25 billion under consideration from the World Bank, and an additional $516 million arranged through Deutsche Bank, bringing the latest known external loan commitments to roughly $7.8 billion. In addition, domestic borrowing through monthly bond issuances continues to add to the overall debt stock,” the businessman also stated.
“Against this backdrop, Nigeria’s 2026 budget shows that health is N2.46 trillion, education is N2.56 trillion, and poverty alleviation is N865 billion, giving a combined total of about N5.885 trillion for these three critical sectors.
“By comparison, debt servicing at about $11.6 billion (approximately N17–N18 trillion, depending on exchange rate assumptions) is almost three times higher than the total allocation to health, education, and social protection combined. This imbalance highlights a troubling fiscal reality in which debt obligations increasingly crowd out investment in human capital and poverty reduction.
“Moreover, even within the limited allocations to these sectors, funds may not be fully released, and a significant portion of what is eventually released could be misappropriated,” he further stated.
Mr Obi said, “The central issue is not borrowing itself, but whether borrowed funds are being converted into measurable productivity, inclusive growth, and improved living standards. Without this, debt servicing shifts from being a temporary fiscal obligation to a long-term structural burden that constrains development and deepens economic vulnerability.”
By Adedapo Adesanya
Pathway Advisors Limited, an issuing house and financial advisory firm, has announced the successful completion of the Series 2 Commercial Paper issuance for Veritasi Homes & Properties Plc.
The Series 2 offer, issued under Veritasi Homes’ newly registered N20.00 billion Commercial Paper Programme, raised N16.76 billion, significantly above its initial N12.00 billion target on the back of strong institutional demand.
This issuance builds on the company’s track record in the Nigerian debt capital market and follows the recently concluded N10 billion 3-year 20 per cent Series 1 Fixed Rate Bond Issuance, further reinforcing investor confidence in Veritasi Homes’ strong credit profile.
The 364-day tenor instrument attracted robust participation from a diverse pool of institutional investors, underscoring sustained confidence in the Company’s financial strength, operating model, and governance standards.
Commenting on the deal, the Founder/CEO of Pathway Advisors Limited, Mr Adekunle Alade (MBA, FCA, M.CIod), noted that the outcome further validates investor appetite for well-structured transactions in the Nigerian capital market.
“The strong oversubscription speaks to the market’s confidence in Veritasi Homes’ performance, governance, and repayment track record. We are pleased to continue supporting issuers with strong fundamentals in accessing efficient funding.’’
He further highlighted that Veritasi Homes’ consistent market activities since 2022, including successful issuances and full redemption of matured obligations, continue to strengthen its reputation among institutional investors.
“Pathway Advisors Limited remains committed to maintaining its leadership position within Nigeria’s capital markets through the origination and execution of transformative, value-driven, and commercially viable transactions by deploying innovative financial solutions and facilitating strategic capital formation across critical sectors.
“We are committed to supporting credible corporates in accessing efficient short-term and long-term financing solutions within the Nigerian capital market,” he said in a statement on Monday.
Speaking on the transaction, the Managing Director/CEO of Veritasi Homes & Properties Plc, Mr Nola Adetola, described the outcome as a strong endorsement of the company’s fundamentals.
“This result reflects the resilience of our business model, our growing market reputation, and the continued trust of the investment community. We are grateful to all institutional investors for their confidence in Veritasi Homes.”
He added that the proceeds from the issuance will be deployed to support the company’s working capital requirements, enhance liquidity, and complete the ongoing development activities across its real estate portfolio.
Mr Adetola also commended Pathway Advisors Limited for its advisory and arranging role in the successful execution of the transaction.
By Aduragbemi Omiyale
The Securities and Exchange Commission (SEC) has approved the transition to the T+1 settlement cycle for capital market transactions from June 1, 2026.
This is coming some months after Nigeria moved from the T+3 settlement cycle to the T+2 settlement cycle.
The T+ settlement cycle is the number of working days required to complete a capital market transaction, such as the trading of securities, shares, and others, from the first day the trade was executed by an investor.
In a notice on Monday, the SEC, which is the apex capital market regulator in Nigeria, said it was authorising the new system to “promote an efficient, fair, and transparent capital market.”
Under the new arrangement, equities and commodities traded by investors at the market would be cleared and settled by the Central Securities Clearing System (CSCS) within one day.
The agency noted that the migration to a T+1 settlement cycle forms part of its ongoing market modernisation initiatives aimed at enhancing market efficiency and strengthening risk management. reducing counterparty exposure, improving liquidity, and aligning the Nigerian capital market with international standards and global best practices.
“Accordingly, all eligible trades executed in the Nigerian capital market shall settle one business day after the trade date (T+1),” a part of the statement noted.
It was stressed that “Friday, May 29, 2026, shall be the final trading day under the existing T+2 settlement cycle. Trades executed on Friday, May 29, 2026, and Monday, June 1, 2026, shall both settle on Tuesday, June 2, 2026. All trades executed from Monday, June 1, 2026, onward shall be subject to the T+1 settlement cycle.”
SEC tasked all capital market operators, securities exchanges, clearing and settlement infrastructure providers, custodians, registrars, issuers, and other relevant stakeholders to take all necessary measures to ensure full operational readiness and compliance with the new settlement framework.
“Market participants are expected to review and align their systems, processes, controls, and operational workflows ahead of the implementation date,” it further stated, promising to continue to engage stakeholders and monitor the implementation process to ensure an orderly and seamless transition.
The regulator said it remains committed to strengthening market integrity, enhancing investor confidence, and fostering the development of a modern. resilient and globally competitive Nigerian capital market.
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