Starved of dollars, Nigerian businesses struggle for survival

By Alexis Akwagyiram and Chijioke Ohuocha
LAGOS/ABUJA, July 30 (Reuters) - As women in hairnets and
anti-coronavirus masks sort through folded nappies coming off a
conveyor belt, the head of the Nigerian firm they work for
wonders how much longer he can afford to keep them in
employment.
Around 80% of the materials that go into Lagos-based diaper
and sanitary towel manufacturer Wemy's products are imported. To
buy them, Paul Odunaiya needs dollars, which he can no longer
find.
"We're pleading with our suppliers to wait a bit longer so
that we can source dollars and pay them," Odunaiya told Reuters.
With the price of oil, Nigeria's main export, depressed and
foreign exchange reserves dwindling, its central bank is hanging
on to its dollars to support the local naira - leaving a
dwindling supply of hard currency to buy the imports that are
the bedrock of Africa's largest economy.
Muda Yusuf, director general of the Lagos Chamber of
Commerce, said that, like Odunaiya, the dollar shortage is
hitting most of its 2,000 members hard.
"If the situation persists it will lead to lay-offs," he
said. "If you are not producing, there will be a shortage of
goods in the market, prices will go up."
Inflation has risen for 10 straight months, hitting a
two-year high of 12.56% in June, piling on greater economic
hardship for a population of whom 40% already live below the
official poverty line of 137,430 naira ($382) per year.
Added to that, there have been two devaluations of the
naira's official rate this year.
With the oil market depressed by a producer price war and
the pandemic-induced global recession, central bank reserves
have fallen 20% in the past year to $36.1 billion, around five
months of import cover.
The bank initially sought to stem the decline by suspending
dollar auctions in March and continues to severely ration their
supply. "It's been excruciating," said Fred Ameobi, executive
director of Coscharis Group, a conglomerate whose businesses
include automobile assembly.
The government says the economy could shrink by up to 8.9%
in 2020, while many of the local banks that Nigerian companies
rely on have seen their dollar credit lines halted by
international lenders who fear they won't be paid back.
Many firms have resorted to the black market, where the
naira trades at around 20% below the official rate, making
dollar purchases even more expensive. For now Odunaiya, whose firm had year to March turnover of
2.5 billion naira, sees only hard times ahead. "It's going to be
a tough year ... Some businesses will die."