Nigerian corporate organisations are employing various strategies to navigate the current recession and dollar shortages in the domestic economy.
The corporates are dealing with lower oil prices, an economy entering its second recession in 4 years and the coronavirus pandemic.
Firms in the wider Nigerian economy and the oil and gas, Telecommunications and Tower companies in particular face a wide range of issues, according to Omega Collocott, Director, Corporate Ratings at Standard and Poor’s (S&P) Global Ratings.
Collocott in a webinar monitored by MoneyCentral yesterday, noted that all major firms operating in Nigeria have been exposed to domestic currency (Naira) volatility and dollar shortages.
Some ways firms are managing the fallout, according to Collocott include:
- Complicated Treasury management whereby firms choose an optimal mix of domestic and foreign currency denominated debt.
- Hedging of oil prices by oil producers. Seplat Petroleum has been doing this for a while.
- Adopting a conservative financial policy
- Firms are also cutting capital expenditure and localizing those they are able to localize
- Firms with foreign holding companies (HoldCos) have helped to accumulate FX offshore to offset domestic dollar shortage
- Lower interest rates domestically are supportive of cash flows.