Naira Scarcity May Worsen Forex Crisis, Fitch Ratings Warns   

Fitch Ratings, a global rating agency, has warned that naira scarcity may hit consumer spending and trigger increased demand for foreign currency and consequently aggravate foreign exchange shortages.

This is one of the highlights of the latest report of the New York, US-based firm on the country, entitled “Nigeria’s Economic Challenges Highlight Importance of Post-Election Policies”.

The new report highlighted the risks associated with grave shortages of newly redesigned naira notes by the Central Bank of Nigeria (CBN) seeking to foist cashless economy.

“Associated cash shortages may hit consumer spending and boost demand for foreign currency, aggravating foreign-exchange shortages,” the provider of credit ratings, commentary and research warned.

“It is not yet clear whether there will be offsetting longer-term economic benefits, such as greater use of the formal banking system or enhanced use of digital payment systems,” Fitch added in the report published on Thursday.

Nigeria has had a running crisis of foreign exchange liquidity since the past two years following a sharp decline in the country’s dollar earnings due to significant drop in its oil production, a result of crude oil theft and other sundry leakages in earnings.

As Africa’s most populous nation grappled with a forex liquidity crisis amidst unprecedented high levels of public debt stock amounting to over N44 trillion and decades high inflation rate, the nation’s apex bank initiated a naira redesign policy in October 26, 2022.

The new higher currency notes of N200, N500, and N1, 000 which were launched on December 15, has triggered disruption in economic activities as the new local currency notes became very scarce and inaccessible by the citizens.