- Most of the company's dollars purchased outside official rate
- Situation in Nigeria `extremely fluid,' soap maker says
PZ Cussons Plc said it is paying as much as 70 percent more than the official rate for dollars in Nigeria as central-bank trading restrictions reduce availability of foreign currency in Africa’s biggest economy.
“Whilst the official naira exchange rate continues to be stable, a lack of availability at that rate is resulting in the majority of dollars being purchased at a premium of 50-70 percent,” the Manchester-based maker of Imperial Leather soap said in a trading update on Thursday. “The resultant cost impact is being managed through changes to relative pricing in an environment where trading conditions remain challenging. The situation in Nigeria remains extremely fluid.”
While oil revenue and exports in Africa’s biggest crude producer have plummeted since 2014, central bank Governor Godwin Emefiele and President Muhammadu Buhari have refused to let the naira weaken. They have pegged it since March 2015 at 197-199 against the dollar through currency-trading and import restrictions that have deterred foreign investment and made it tough for manufacturers to buy inputs from abroad. The black market rate has fallen to 320, around the level PZ Cussons implies it is buying dollars.
Listed companies in Nigeria still try and source foreign-exchange from their banks at the official rate, even though it’s becoming harder. Unilever Plc, which like PZ Cussons has a subsidiary trading on the Nigerian Stock Exchange, said last month it would be “very insane” for the country to persist with the currency policies.
Nestle SA said its local unit has had to widen the number of banks it uses so that it can access enough foreign exchange. Last year, it was waiting as long as six weeks to be allocated dollars, according to Renaissance Capital Ltd. analysts.
PZ Cussons Nigeria Plc’s shares have fallen 8.6 percent to 23.50 naira this year. The country’s All Share Index has dropped 14 percent, the fifth-most globally among 93 indexes tracked by Bloomberg.