Nigeria’s central bank has signed a landmark agreement with the International Finance Corp. (IFC) to support local-currency financing, aiming to strengthen demand for the naira and reduce exchange-rate risks for Nigerian businesses borrowing in foreign currencies.
The IFC aims to significantly expand its financing in Nigeria, with plans to provide over $1 billion across critical sectors in the coming years, according to a joint statement issued on Monday. This partnership will enable the IFC to manage currency risks more effectively, thereby increasing its investments in naira across priority sectors such as agriculture, housing, infrastructure, and energy, the statement noted.
The move comes as Nigerian businesses face challenges following monetary reforms that led to a naira devaluation in June 2023, dramatically increasing the cost of foreign-currency loans. The naira has depreciated by 71%, currently trading at around 1,600 per dollar, according to data from trading platform FMDQ. To mitigate foreign exchange exposure, major firms including Nigerian Breweries Plc, MTN Nigeria Communications Plc, and Togo-based Ecobank Transnational Inc.’s Nigerian unit are now reducing their dollar-denominated debt.
Central Bank Governor Yemi Cardoso expressed optimism, stating the agreement with IFC “will unlock much-needed long-term local currency financing for private businesses in Nigeria at economically viable rates.” This partnership aims to ease the financial pressures on Nigerian companies and foster growth in key economic sectors.
