Unilever Forced to Buy Dollars at 9% Above Market in Nigeria

(Bloomberg) -- Unilever Nigeria Plc is being compelled to buy dollars above the market rate because rationing of foreign-exchange by the West African nation’s central bank has caused a shortage of the U.S. currency.

The local unit of Unilever Plc bought the greenback from money changers and lenders at between 440 to 450 naira on an average in the first-half of the year, Adesola Sotande-Peters, finance director at the company, said at an investor conference call in Lagos. That compares with 410.72 naira to a dollar at 7.28 a.m. in Lagos on Friday.

Nigeria, Africa’s biggest crude producer, has been rationing dollars as the pandemic-induced slowdown, and a slump in oil prices put pressure on reserves. That’s increasing costs for some companies, while others such as Bua Cement Plc are cutting imports. Reserves have dropped about 5% this year to $33.6 billion as of Aug. 10.

Last month, the Central Bank of Nigeria halted the sale of foreign exchange to money changers, sucking out $5.72 billion of annual supply.

Unilever hasn’t seen an increase in dollar supply since the central bank’s latest policy, Sotande-Peters said. “We are still waiting to see how liquid banks will be” to meet a lot of customers’ demand, she said.

The maker of Close-Up toothpaste and Lux soap in Nigeria needs foreign exchange to import petrochemicals, a raw material for many of its products, according to the finance director.

In order to ameliorate the impact of the dollar shortage on operations, Unilever is increasing local sourcing of raw materials to enable it be “forex neutral in the very near future,” Carl Cruz, managing director said at the same conference call.

The company plans to transfer its tea business to a newly incorporated firm in October as part of a global strategy to maximize value for shareholders, Sotande-Peters said. “We will realize cash from the transaction.”

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