(Bloomberg) — Nigeria’s central bank and the International Finance Corp. signed an agreement to facilitate local-currency financing, hoping to boost demand for naira while helping firms to avoid the the exchange-rate risk of borrowing in foreign currencies.
“The IFC aims to significantly scale up its financing of critical sectors in Nigeria, with a goal of providing more than $1 billion in the coming years,” the institutions said in joint statement on Monday. “The partnership will allow the IFC to manage currency risks and increase its investment in Nigerian naira across priority sectors” including agriculture, housing, infrastructure and energy, they said.
Companies in Africa’s most populous nation suffered losses following monetary reforms that resulted in a devaluation of the naira in June 2023, increasing the cost of their foreign-currency loans. Many firms were forced to raise more borrowing to remain afloat.
The naira has weakened 71% since the reforms to around 1,600 a dollar, according to the latest data from the trading platform FMDQ. Firms including Nigerian Breweries Plc, MTN Nigeria Communications Plc and the local unit of Togo-based Ecobank Transnational Inc. are cutting their dollar debt to curb forex exposure.
The partnership with the IFC, “will unlock much-needed long-term local currency-financing for private businesses in Nigeria at economically viable rates,” Central Bank of Nigeria Governor Yemi Cardoso said in the statement.
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