Economy
Fitch says CBN still far short of amount needed to clear forex backlog
Fitch, a credit ratings agency on Thursday, said the Central Bank of Nigeria (CBN) has continued to face shortage of foreign exchange needed to clear the forex backlog.
Gaimin Nonyane, Fitch’s Director of Middle East and Africa Sovereigns, who stated this, noted that the country’s high debt service to revenue ratio is also contributing to a challenging sovereign credit rating.
He observed that the ongoing foreign exchange shortages in Nigeria would exert pressure on the naira.
“We think that the central bank is still very well short of the amount it needs to be able to clear the foreign exchange backlog and also meet the extremely large external financing by the private sectors,” she said.
She warned that Nigeria’s interest payments to revenue ratio, surpassing 40%, poses a significant weakness for its credit rating four times higher than the median for B-rated sovereigns.
This is as she pointed out that interest-to-revenue ratios across Africa have more than doubled since 2014, driven by heightened borrowing and increased costs due to global interest rate hikes.
The CBN had recently begun clearing a backlog of FX forwards to companies looking to repatriate the cash abroad.
The governor of the apex bank, Olayemi Cardoso estimates the total backlog in the range of $7 billion.
The apex bank stated recently it has cleared around $2 billion of the backlog in the past three months and would ensure there is liquidity in the forex market.