Over the weekend, President Muhammadu Buhari reiterated his support for the CBN's policy not to devalue the naira in the official market despite the naira weakening to historical lows on the black market last week. The former CEO of Honeywell Flour Mills, joins CNBC Africa to discuss the implications of the dollar shortage.
In an exclusive interview with CNBC Africa, pioneer CEO of Honeywell Flour Mills, Babatunde Odunayo, has said many companies in Nigeria will begin to shut down over the next four to six weeks.
Odunayo who is a member of the Nigerian Economic Summit group said that it was not the best time for anyone to be president of Nigeria, adding that devaluation would be harmful to industry. He said many companies planning expansion had borrowed money in dollars, and remain in a very difficult position to pay back.
He said, "People committed to expansion projects at 170, 178, and they thought this is profitable, let’s do it, let’s borrow. They borrowed $30 million or 40, 50; the devaluation difference alone can send them packing," said Odunayo.
Odunayo who is also a member, board of directors at FBN Mortgage, said, "So industry does not support devaluation. But industry thinks government should relax its policies. It’s not the best time to clamp on other sources of dollars.
"If oil was selling at $100 or more, you can say OK, if you don’t do it through the central bank, I don’t want to know you, because I don’t even know the source of your money."
He said government policies mandate that if any company must use dollars outside the CBN, it must show it to CBN as an inflow. "How many companies in Nigeria earn foreign currency as an inflow into a dom account?" he queried, adding that industry has "four weeks, maybe six weeks" before "significant closure and loss of employment."
Odunayo added that it was an error on the part of the CBN to explicitly announce that it would no longer fund bureau de change operators. "That sent the naira rate packing. You don’t need to go and make such announcement. They can go tomorrow and say; ‘now we shall begin to sell some limited amount to bureau de change’.
"Whether you give $50,000 or $10,000, the fact is that you’re selling something. It would reduce the pressure, the reduction in pressure is not commensurate to what you give; it’s the relax atmosphere that makes the naira go down."
Watch the interview below;