Nigerian Manufacturers ‘Harassed' Over FX Contracts, Lobby Says
(Bloomberg) -- Nigerian manufacturers say they're being 'harassed' by lenders over outstanding forward foreign exchange contracts with the central bank.
The contracts are a legacy of the West African nation's old fixed-currency regime, which was relaxed in 2023, and the Manufacturers Association of Nigeria said members have faced penalties including frozen accounts over the impasse.
Banks are inflicting 'unwholesome treatments,' the Lagos-based group said in a statement. 'Our members have reported significant unwarranted complexities and undue high-handedness by the banks.'
The Bank Directors Association of Nigeria did not respond to requests for comment.
The overhang stems from a longstanding practice by the Nigerian Central Bank to ration scarce dollars to the domestic economy, while pegging the naira at an artificially inflated level against the US currency.
The policy was abandoned after President Bola Tinubu came to power two years ago, but the dollar backlog has taken time to pay down, contributing to the volatility of the local unit which has lost about 70% of its value against the greenback.
The problem stems from the way the system worked.
Nigerian companies bid for dollars via forward contracts via the commercial lenders, who received the US currency from the central bank in exchange for naira. The process is reversed when the contract ends. But the CBN hasn't supplied the dollars and commercial lenders now want the companies to find the dollars elsewhere.
MAN said in August its members were waiting for the central bank to settle $2.4 billion of overdue contracts. The CBN, which in March announced it had cleared a backlog of $7 billion, initially disputed the claims, but later said it would investigate and settle on merit.
'We reiterate our call on the Central Bank of Nigeria to speed up the long overdue redemption of the unsettled forex forward, ' MAN said. 'Our members should not be harassed.'
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