Nigeria Signs Deal With IFC to Boost Local Currency Financing
TLDR
- Nigeria's central bank and the International Finance Corporation (IFC) signed an agreement to expand local-currency financing, reducing exchange-rate risk for businesses.
- The IFC plans to invest over $1 billion in Nigeria's agriculture, housing, infrastructure, and energy sectors, helping manage currency risks and channel more funds in naira to critical sectors.
- The devaluation of the naira in June 2023, weakening by 71% to around 1,600 per dollar, has affected Nigerian businesses like Nigerian Breweries Plc, MTN Nigeria, and Ecobank Nigeria, leading them to reduce dollar debt.
Nigeria’s central bank and the International Finance Corporation (IFC) signed an agreement to expand local-currency financing in Nigeria, aiming to reduce exchange-rate risk for businesses and increase demand for naira loans.
The IFC plans to invest over $1 billion in Nigeria’s agriculture, housing, infrastructure, and energy sectors, according to a joint statement released on Monday. The partnership will help manage currency risks, enabling the IFC to channel more funds in naira to critical sectors.
Nigerian businesses were hit hard by the June 2023 devaluation of the naira, which has since weakened 71% to around 1,600 per dollar. The shift has increased foreign-currency loan costs for companies like Nigerian Breweries Plc, MTN Nigeria, and Ecobank Nigeria, prompting them to reduce dollar debt.
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Key Takeaways
The IFC’s naira-focused financing partnership aims to relieve Nigerian firms from currency-related debt pressures and foster sustainable growth. Following Nigeria's currency reforms, which drove up dollar-based debt costs, local companies face increased financial strain. By facilitating long-term naira financing, the Central Bank of Nigeria and IFC intend to stabilize borrowing conditions and bolster naira liquidity.
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