Nigeria may face challenges clearing forex backlogs

Significance

The budget is built on unduly optimistic assumptions. Meanwhile, the Central Bank of Nigeria (CBN) is seeking loans to help clear foreign exchange (forex) backlogs while struggling to stabilise the naira and manage high inflation.

Impacts

• The deficit for this year’s budget will be larger than projected.
• If the Dangote refinery can quickly scale up production, it may marginally reduce fuel costs at the pump.
• The government may seek to raise revenues by listing state-owned enterprises on the stock exchange.
• Investor confidence may take time to improve once the exchange rate stabilises.