Nigeria would be misguided to persist with currency policies that have led to a record difference between the naira’s official and black-market rates, according to the local head of Unilever Plc.
“It would be very insane to continue like this for months and months,” Unilever’s Africa President Bruno Witvoet said in an interview on Monday at a conference in Abidjan, Ivory Coast’s commercial capital. Clarity on what the “right rate” is would help businesses “make more sensible decisions,” he said.
The central bank of Africa’s biggest economy and oil producer introduced capital controls and restrictions on some imports in a bid to prop up the naira, which has been effectively pegged at 197-199 against the dollar since March 2015. Those measures have deterred foreign investment and led to a scarcity of dollars, with the black-market exchange rate falling to around 325 per dollar.
President Muhammadu Buhari has backed the central bank’s stance and ruled out a devaluation on the grounds it would cause prices to rise. That’s already happening, with inflation surging to a three-year high of 11.4 percent in February from 9.6 percent the previous month.
Buhari said in a speech on Monday that the hard-currency squeeze is “a temporary phase which we shall try to overcome.”
Governor Godwin Emefiele is set to announce the Abuja-based central bank’s next interest-rate decision on Tuesday and few analysts think he will declare a change in the foreign-exchange policy. The central bank will probably maintain its key interest rate at 11 percent, according to all 14 economists surveyed by Bloomberg.
Unilever is less vulnerable than many other manufacturers to the dollar shortages since it sources about 93 percent of its inputs from Nigeria, said Witvoet. Other foreign-owned companies, including Nestle SA’s Nigerian unit, are having to approach more banks to get around the scarcity.
“We just widened our number of banks to source forex,” Kais Marzouki, Nestle’s chief executive officer for West and Central Africa, said in an interview in Abidjan on Tuesday. “So far we have been able to manage.”