The strain is concerning for entrepreneurs who highlight the challenges posed by exchange rate volatility and call for sustainable solutions amid fluctuating policies and economic dynamics.



The Nigerian naira is facing continuous strain on the foreign exchange (FX) market, reaching ₦1,145 per dollar on the parallel market, a slight dip from ₦1,140 on Monday.



Two pivotal policies, implemented since President Bola Tinubu&#8217;s inauguration on May 29, have significantly influenced Nigeria&#8217;s economic landscape. The immediate cessation of the fuel subsidy on the inauguration day and the naira unification on June 14 marked a departure toward a free-floating system by the Central Bank of Nigeria (CBN).



Under this system, deposit money banks (DMBs) and forex market dealers are allowed to engage in unrestricted buying and selling of currency at market-determined rates. This shift signifies a move away from the previous multiple forex regime to a more flexible approach.



The naira experienced a period of depreciation, plummeting to ₦1,310 in October on the parallel market. However, it briefly rebounded to ₦960 in early November. While the naira is demonstrating signs of appreciation at the investors and exporters (I&amp;E) window, the parallel market remains a preferred choice for urgent business transactions due to its ease of accessibility. This preference intensifies the pressure on the naira.



When requesting foreign currency in Nigerian banks, certain regulatory documents are necessary for Form A, including Personal Travel Allowance (PTA), Business Travel Allowance (BTA), school fees, and medical fees. Additionally, Form Q applications for Small and Medium Enterprises (SMEs) may entail a rigorous and time-consuming process which takes days.



At the Autonomous Foreign Exchange Market (NAFEM), the naira was quoted at ₦830.97 on Tuesday, an appreciation from ₦847.55 quoted on Monday, as reported by data from the Financial Markets Dealers Quotations (FMDQ).



The official market witnessed a peak spot rate of ₦1,120 per dollar and a lower rate of ₦701 on Friday. The daily FX market turnover surged by 23.60 percent to $157.78 million on Friday from the $127.65 million recorded on Thursday, reflecting the dynamic nature of the foreign exchange landscape in Nigeria.



Exporters like Oluwaseun Obilana are expressing deep concern over the implications for their businesses.



Obilana, a player in Nigeria&#8217;s export industry, voices his apprehension about the continuous strain on the national currency as exporters rely on stable exchange rates for international trade.



Emphasizing the challenges this poses for exporters, Obilana states to FORBES AFRICA, &#8220;The volatility in the exchange rate is affecting our ability to plan and price our products competitively in the global market. It adds uncertainty to our operations and erodes the profitability of our businesses.&#8221;



He adds: &#8220;A weaker naira not only impacts pricing but also raises the cost of importing raw materials and machinery crucial for manufacturing and production. This, in turn, could have cascading effects on the overall economy.&#8221;



The CBN has been grappling with measures to stabilize the exchange rate, implementing various policies to address the challenges faced in the FX market. However, the recent fluctuations indicate the persistence of underlying issues that continue to pose a threat to the stability of the national currency.



Obilana calls for more sustainable solutions to ensure the stability of the naira.



Nigerian investor Moses Adeolubodun highlights the need for a comprehensive strategy to address the challenges facing the naira.



&#8220;The consistent depreciation of the naira is a cause for concern and demands urgent attention from relevant authorities. A resilient and stable currency is crucial for investor confidence and economic growth,&#8221; Adeolubodun tells FORBES AFRICA.



He also attributes the recent fluctuations to a variety of factors, including global economic uncertainties, fluctuating oil prices, and domestic challenges. Nigeria, being an oil-dependent economy, is particularly susceptible to the volatility of oil markets. &#8220;The recent trend has put additional pressure on policymakers to explore more effective solutions.&#8221;



Adeolubodun emphasizes the importance of collaborative efforts between the government and the private sector to devise sustainable strategies. &#8220;We need a holistic approach that addresses both short-term challenges and establishes a foundation for long-term stability,&#8221; he states.

Naira Value Plunges on Street Amid ‘Stampede’ for Dollars

FX Pressure Persists As Nigerian Naira Hits ₦1,145 Per Dollar On Parallel Market

Ratings agency, Fitch Ratings highlighted the growing gap between the official and parallel market rates of the naira, emphasizing some of the hurdles in sustaining exchange-rate liberalization and raising concerns about a potential further devaluation.



Research shows that the naira is currently trading at 1,002 to the dollar in the parallel market, while the official market, also known as the Investors and Exporters (I&amp;E FX) window, closed at ₦775 on Thursday, as reported by FMDQ, a securities exchange firm.



The promise made by President Bola Tinubu on May 29 to unify exchange rates led to the Central Bank of Nigeria&#8217;s (CBN) announcement on June 14 of a free-floating system. This transition allowed deposit money banks (DMBs) and foreign exchange market dealers to freely buy and sell forex at market-determined rates, resulting in a 40% depreciation of the currency against the dollar in June.



While these currency reforms initially narrowed the gap between official and parallel market rates, Fitch Ratings noted that the spread started widening again in August. This widening is attributed to inadequate official dollar supply, putting pressure on the naira.



In the last two weeks, the naira has experienced a sharp decline in street trading as the CBN refrained from increasing the supply of the greenback at the official window, contributing to increased volatility in the currency rate.



Despite emphasizing the importance of economic growth during his confirmation, Dr Olayemi Cardoso, the new governor of the CBN, is also yet to signal his policy preferences.



Assessing the development, business analyst, Oluwaseyi Jimoh sheds light on the multifaceted challenges contributing to the weakness of the national currency. Jimoh emphasizes the diverse array of factors influencing currency values, ranging from economic conditions to global market forces.



&#8220;The challenges faced by the naira are substantial, rooted in various issues that need careful consideration,&#8221; Jimoh tells FORBES AFRICA. &#8220;One pivotal aspect is the lack of export mobility, with Nigeria heavily reliant on oil exports. Fluctuations in global oil prices directly impact the naira, highlighting the urgency of diversifying our export base and fostering non-oil sectors for enhanced stability and resilience.&#8221;



Jimoh also points out the impact of government intervention in local production, emphasizing the delicate balance required. &#8220;While protectionist measures aim to safeguard domestic industries, they must not inadvertently stifle competition and hinder efficiency. Striking the right balance is crucial for sustained economic growth.&#8221;



The ease of doing business in Nigeria has emerged as another critical factor affecting the naira&#8217;s strength. &#8220;Bureaucratic hurdles, inconsistent policies, and infrastructure gaps can deter foreign investment and impede economic growth,&#8221; notes Jimoh. &#8220;Enhancing the ease of doing business is pivotal for attracting investors, stimulating economic activity, and potentially fortifying the naira.&#8221;



Highlighting the role of citizens in shaping the economy, Jimoh expresses concern about the lack of patronage for local products and adds that encouraging domestic consumption can significantly contribute to creating job opportunities and boosting local industries.



To address these challenges, he advocates for a comprehensive approach involving policy reforms, infrastructure development, and initiatives to bolster local industries. &#8220;Tackling these issues collectively is key to improving the strength and stability of the naira while fostering sustainable economic growth in Nigeria,&#8221; concludes Jimoh.



An investor, Moses Adeolubodun, expresses his apprehension over the currency&#8217;s diminishing strength, citing various economic factors.



Adeolubodun warns that the naira’s decline could have significant repercussions for the economy. He points to a combination of factors contributing to this downturn, including fluctuating oil prices, external debt pressures, and concerns over the country&#8217;s fiscal policies.



&#8220;The Nigerian economy is facing a delicate situation with the naira losing ground against major currencies. The volatility in oil prices, a key driver of Nigeria&#8217;s revenue, has added strain to an already challenging economic landscape,&#8221; remarks Adeolubodun.



Oil, which constitutes a substantial portion of Nigeria&#8217;s export earnings, has experienced unpredictable price fluctuations in recent months. This volatility, coupled with global economic uncertainties, has placed the currency under additional stress.



Adeolubodun also highlights concerns about the nation&#8217;s rising external debt, emphasizing the need for prudent fiscal management. &#8220;Addressing the issue of escalating external debt is crucial for restoring confidence in the Nigerian economy. Investors are closely watching how policymakers navigate these challenges,&#8221; he states.



As the CBN grapples with maintaining exchange rate stability, Adeolubodun suggests a comprehensive and strategic approach to economic management. He underscores the importance of implementing reforms that encourage foreign investments, improve non-oil sectors, and enhance transparency in government’s financial operations.

New Nigerian naira banknotes in a wallet

Fitch Ratings Warns Of Further Nigerian Naira Devaluation As Exchange Rate Challenges Persist

The Nigerian naira has plummeted, alarming experts who suggest to us measures that may be used to address the situation.



The Nigerian naira has reached an all-time low, with the exchange rate hitting ₦1,005 to $1 in the parallel market, according to FORBES AFRICA&#8217;s latest findings.



This depreciation represents a drop from around ₦900 per dollar at the beginning of September.



Observers say the lack of intervention from the Central Bank of Nigeria (CBN) this month has allowed the naira&#8217;s value to plummet in the parallel market.



The recent decision by President Bola Tinubu to unify exchange rates in Nigeria led to the CBN&#8217;s move towards a free-floating system, allowing deposit money banks (DMBs) and foreign exchange market dealers to freely buy and sell forex at market-determined rates. This shift marked a transition from the previous multiple forex regime to a more flexible approach, implemented on June 14.



Dr Olayemi Cardoso, who was recently nominated and confirmed as the 12th Governor of the CBN, emphasized the importance of economic growth during his confirmation by the Nigerian Senate.



&#8220;Our feeling is that in identifying the important issues with economic growth, we believe very strongly that size matters,&#8221; said Cardoso. He highlighted the administration&#8217;s goal of achieving $1 trillion-GDP within eight years and underscored the need for stability in various economic indices.



But Iheakanwah Felix Arinzeh, a financial expert and doctor of business administration, expresses his concerns to FORBES AFRICA: &#8220;The current rate of over ₦1,000 to a dollar at the FX parallel market is a sign of the lack of confidence in the Nigerian economy.&#8221;



Arinzeh points out that the parallel market rate is typically higher due to the premium people are willing to pay for dollars to safeguard their savings and make international investments. &#8220;The fact that this rate has reached over ₦1,000 suggests that many Nigerians are losing faith in the naira, seeking ways to hedge their financial security.&#8221;



The consequences of this decline are multifaceted. It makes importing goods and services more expensive, eroding the value of savings and, according to Arinzeh, is likely to lead to higher inflation and operational challenges for businesses, especially those already struggling.



Arinzeh emphasizes that Nigerians&#8217; reliance on the parallel market for foreign exchange stems from disruptions in the official supply of foreign exchange through the CBN.



&#8220;Factors contributing to the naira&#8217;s decline include global currency shortages exacerbated by events like the Ukraine war, Nigeria&#8217;s high debt levels, and overreliance on oil exports.&#8221;



To combat these challenges, Arinzeh proposes a series of measures, such as &#8220;addressing the underlying causes of the FX shortage, including declining oil exports, rising imports, and capital flight&#8221;.



He also suggests &#8220;public education about the dangers of round-tripping and parallel market activities” and adds: “Offering incentives, such as tax breaks, to encourage businesses to use official FX channels. A crackdown on corruption within the FX market. Transparent communication of the government&#8217;s plans to stabilize the naira and address FX shortages.&#8221;



Kelvin Emmanuel, an economist, highlights the situation of the naira to FORBES AFRICA, stating, &#8220;The drop of the naira above 1,000, and the quotes seen on exchange traded platforms for currency futures at ₦1,200, explain the pressure on the spot markets to provide the liquidity the market requires for various critical financial transactions, including Form A, M, Q, matured (commercial) Letters of Credit, capital remittances, and dividend remittances.&#8221;



Emphasizing the impact of a growing parallel-market premium, one trend Emmanuel points out is the pressure on the spot markets, &#8220;exacerbated by the fact that the attempted liberalization of the foreign exchange (FX) markets has not removed the ban placed on 41 items; 0.40 cents of every $1 moves from the I&amp;E window to the parallel market&#8221;.



Emmanuel proposes several short-term solutions to address the crisis, including the government raising an intra-Central Bank loan, converting foreign direct investment pledges into certificates of capital import, or seeking assistance from the International Monetary Fund (IMF).



He stresses the urgency of resolving the outstanding forwards, stating: &#8220;Considering how sensitive Nigeria’s supply chain is, and the shocks that a falling naira portends to key imports in food and energy, it’s important that the outstanding forwards are sorted out immediately.&#8221;

Nigeria  High Resolution Economy Concept

Naira Hits Historic Low At ₦1,005 To $1 In Parallel Market, Raising Concerns Amid Economic Challenges

It’s bad enough that fintech startups have to grapple with the&nbsp;<a href="https://www.forbes.com/sites/forbestechcouncil/2023/04/27/finding-vc-funding-is-harder-now-for-startups/?sh=581ae6da7e82">challenge</a>&nbsp;of competing for funds in a global venture capital market that&#8217;s experiencing a funding drought. There is an extra hurdle for those using foreign capital to create new financial products in Nigeria: the value of the country’s currency has fallen 43% over the past year alone thanks to recent currency reform.



Nigeria is Africa’s biggest economy–it’s home to more than 220 million people and the continent’s&nbsp;<a href="https://disrupt-africa.com/2023/02/09/nigeria-is-the-clear-leader-for-african-startup-funding-yet-a-trickle-down-is-happening/" target="_blank" rel="noreferrer noopener">leading destination</a>&nbsp;for startup funding. A substantial portion of its financial transactions still occur in cash, creating a fertile ground for the development of multiple fintech solutions.



“There is a bit of instability happening in the country right now,” says Luci Fonseca, lead partner at San Francisco-based Base10 Partners, which has funded multiple Nigerian businesses, including payments startups Nomba and Okra and e-commerce firm Bumpa. “It creates a number of challenges for a business that charges in naira and reports its revenue in U.S. dollars.”



The massive depreciation of the local currency puts pressure on businesses in multiple ways, according to Gbenga Ajayi, lead partner at VC firm QED<a href="https://www.forbes.com/investment-funds/qed/" target="_blank" rel="noreferrer noopener">QED</a>&nbsp;<a href="https://www.forbes.com/investment-funds/qed/">0.0%</a>&nbsp;Investors, where he focuses on investing in African startups, including payments startup Moniepoint and pharmaceutical management firm Remedial Health. Ajayi said that access to foreign exchange is “one of the biggest challenges” that investors face in the market.



“If you&#8217;re from Nigeria, from Egypt, or even from Kenya, you&#8217;re very much aware that when your currency starts to depreciate, it affects spending power, purchasing power, and there is just a lot of uncertainty,” says Ajayi.



Last year, African startups raised 227 rounds of funding, according to <a href="https://protect-us.mimecast.com/s/PSx0CNk7A3slxG1nI4XZuL?domain=cbinsights.com/" target="_blank" rel="noreferrer noopener">CB Insights</a>, 174 of which went to Nigerian companies. More than 80% of the investors who financed Nigerian businesses this year before the foreign exchange market&#8217;s liberalization were based outside the country, according to PitchBook data, underscoring the significance of foreign capital within the country’s business landscape.



Nomba raised $30 million in May 2023, largely funded by foreign venture capitalists at a valuation of $148 million, according to PitchBook. Lagos-based e-commerce startup Sabi secured $38 million in May at a $300 million valuation, while electronic medical records provider Helium<a href="https://www.forbes.com/digital-assets/assets/helium-hnt/" target="_blank" rel="noreferrer noopener">HNT</a>&nbsp;<a href="https://www.forbes.com/digital-assets/assets/helium-hnt/">0.0%</a>&nbsp;Health got $30 million in a Series B round in June. For outfits like embedded payments firm OnePipe, which secured $4.5 million in debt capital in March, it could make repayment more challenging than envisaged.



Some of the strategies startups are employing to manage currency risks include attracting more customers who transact in dollars; paying local employees, vendors and partners with naira reserves; and adding fees for customers who make payments in naira.



“The startups that are mitigating the reform best are those that already started hedging against the naira even before the reform,” says Mathew Saunders, head of investment at venture capital firm Future Africa. Another method he has seen companies use is “diversifying the customer base to include more international players that can make payment in dollar equivalents,” he says.



Currencies in China, India, Turkey, and Argentina are among the major emerging market currencies that have also come under pressure this year, driven in part by a stronger U.S. dollar. But the situation takes a different turn in African nations such as Nigeria, Egypt and Kenya, which are finding it&nbsp;<a href="https://www.forbes.com/sites/segunolakoyenikan/2023/07/02/africa-becomes-a-casualty-in-the-war-against-inflation-as-dollars-dry-up/?sh=42bd034755f1">increasingly difficult</a>&nbsp;to obtain hard currencies like dollars, pounds or euros.



For countries like Nigeria, which has a long history of supplying dollars to the foreign exchange market to keep the local currency stable, the limited dollar reserves make it challenging for the Central Bank of Nigeria (CBN) to meet the demand of dollars for transactions like imports, where suppliers often require payment in dollars.



Authorities allowed the pegged naira currency to trade more freely in June after foreign reserves fell further to $34 billion from $39 billion a year earlier. With only 35% of the current reserves available for use, according to Abdulazeez Kuranga, macroeconomic strategist at Lagos-based Cordros Securities, “the low liquidity position clarifies why the CBN’s FX supply to the official windows has been underwhelming.”



Since the devaluation on June 14, 2023, the value of the naira has dropped a whopping 40% against the United States dollar in the official window, the currency market where government transactions occur. With inflation at 24% in July, a weaker service demand could potentially put a strain on startups’ revenue and, subsequently, their valuations, especially since some of them generate earnings in naira but report their financials in U.S. dollars.



Nigeria’s central bank authorities say all hands are on deck to stabilize the exchange rate. However, should the currency situation fail to improve, startups backed by foreign capital would have to intensify efforts to significantly boost earnings in order to assuage the impact of the devalued naira or come up with strategies to mitigate these risks.

Nigerian Naira Currency And General Economy As Country Set To Exit Recession

Nigeria’s Sliding Currency Leaves Foreign-Backed Startups In Limbo

The country&#8217;s foreign exchange unification policy has garnered favorable sentiment in the financial landscape, enabling individuals and businesses to access financial services more efficiently. Experts say these steps toward a collective and transparent foreign exchange system could contribute to Nigeria’s economic recovery.



Following President Bola Tinubu&#8217;s decision to unify exchange rates in Nigeria, the Central Bank of Nigeria (CBN) has taken the initiative to allow the deposit money banks (DMBs) and foreign exchange market dealers to freely buy and sell forex at market-determined rates. This move marks a shift from the previous multiple forex regime to a &#8220;free-floating&#8221; system.



The foreign exchange unification policy has yielded positive developments in the country&#8217;s financial landscape. Customers have quickly embraced the initiatives introduced by the DMBs, which aim to provide seamless and convenient foreign exchange services.



With the option to convert FX to naira through online banking platforms, customers can now avoid the hassle of withdrawing cash and resorting to the parallel market for currency exchange. This shift reflects the increased confidence in the unified exchange rate system and the government&#8217;s commitment to creating a transparent and efficient FX market.



Smart Solutions For The FX Market



Recognizing the importance of diaspora remittances to the Nigerian economy, the CBN introduced measures to facilitate smoother transactions. A recent circular issued by the CBN announced that the naira is now a payout option alongside FX and the eNaira for the receipt of diaspora remittances.



In response to the evolving financial landscape, Nigerian banks are introducing innovative solutions to better serve their customers. One notable offering is the FX Cash Backed Loan, which enables domiciliary account holders to access naira loans of up to 85% of their available FX balance. This financial product allows individuals to meet their immediate financial needs without the requirement to withdraw or spend their FX holdings. By leveraging their FX assets as collateral, customers can access funds conveniently, supporting their personal and business objectives.



The suspension of international transactions on naira cards has been lifted by one of the banks, offering individuals greater flexibility in conducting cross-border transactions. This development allows cardholders to make international payments and purchases seamlessly, eliminating the previous limitations that hindered international financial interactions. The restoration of international transaction capabilities represents a significant step toward aligning Nigeria&#8217;s financial system with global standards and facilitating international trade and commerce.



Nigeria&#8217;s dollar-denominated sovereign bonds have experienced notable gains, reflecting the market&#8217;s positive sentiment. The announcement of the FX rules has resulted in an increase in the price of the country&#8217;s eurobonds, with some issues reaching their highest prices in months. Issuance matured in 2033 up 2.4 cents to 78.625 cents, the highest in over five months.



It is worth noting that Nigeria has been grappling with severe dollar shortages, which have led many individuals to seek foreign currency in the parallel market. The implementation of the foreign exchange unification policy aims to address these shortages by promoting transparency, reducing the reliance on the parallel market, and aligning the naira&#8217;s value with its official exchange rate. These efforts will contribute to a more stable and efficient foreign exchange market, providing individuals and businesses with greater certainty and access to FX.



Short-Term Pressure vs Long-Term Gains



The Nigerian government&#8217;s decision to unify exchange rates and implement comprehensive FX reforms is a significant milestone in the country&#8217;s economic journey. However, Nigerian economists note further efforts are needed to strengthen the export sector, increase FX earnings, and ensure effective control measures to prevent market distortions.



Subomi Plumptre, the Chief Executive Officer of Volition Cap, predicts a competitive market to the benefit of the public. Plumptre tells FORBES AFRICA: &#8220;The fact that customers can now convert dollars to naira on online banking platforms is expected to drive competition among International Money Transfer Operators (IMTOs). This could spark innovation leading to lower transaction fees and better rates for the public. The FX Cash Backed Loan, which offers naira loans to foreign currency holders, serves as an example of how easing foreign exchange regulations can stimulate innovation among financial service providers due to competitive pressures.&#8221;



She believes that &#8220;while the naira has depreciated substantially following the implementation of the FX unification policy, in the long-term, reduced FX intervention could yield positive outcomes.&#8221;



Plumptre adds, &#8220;A singular, market-determined exchange rate would improve transparency, eliminate opportunities for arbitrage and rent-seeking, and ultimately contribute to greater investor confidence and financial markets stability. In turn, these benefits could encourage dollar inflows, which may strengthen the naira’s exchange rate. The ongoing naira depreciation is part of the short-term price discovery process further driven by the fact that the official naira exchange rate was held artificially low, worsened by the stringent global financial conditions that underpin dollar shortages.&#8221;



Kelvin Emmanuel, an economist, commends the Nigerian government&#8217;s decision. &#8220;This is critical not only because the difference between official and parallel markets created a 63% black market premium for arbitrageurs that cost the government about $329 million every month in FX subsidy, but also because unification is going to address a chronic issue the Nigerian government has been battling with for years,&#8221; he tells FORBES AFRICA.



Emmanuel expresses excitement that &#8220;the decision to book independent revenues from government-owned enterprises, at investors and exporters rates, its decision to have the CBN create non-deliverable forwards for short- and long-term foreign investors is leading to appreciation of bond yield curve and bringing investors back into both the capital markets and the real economy.&#8221; He also believes that these reforms will contribute to economic reflation and long-term growth.



FX Round-Tripping And How It Affects The Market



Iheakanwah Felix Arinzeh, a financial expert and doctor of business administration, supports the recent FX policy, acknowledging &#8220;the need to defend the naira against excessive foreign exchange fluctuations.&#8221; However, Arinzeh emphasizes to FORBES AFRICA the importance of addressing the inadequate FX earnings and reserves by enhancing export infrastructure.



Arinzeh suggests measures to further strengthen the control of FX rates and discourage round-tripping. &#8220;In exploring the unending increase in the FX rate, particularly in the black/parallel market, FX round-tripping is one of the major causes. FX round-tripping is a situation where customers divert foreign exchange obtained from the CBN at an official rate to the black market for higher profits. The practice had created artificial FX scarcity and had denied users of foreign exchange even in their most basic transactions. I recommend that all export FX proceeds be converted via banks and that willing sellers should not in any way be allowed to nominate a willing buyer.&#8221;



&#8220;The harmonization of exchange rates requires a transition period for the adjustment of the exchange rate to align with the official rate. During this period, inflationary pressures may arise, especially if the parallel market rate was significantly higher than the official rate. However, with proper monetary and fiscal policies, these inflationary pressures can be managed effectively,&#8221; says Arinzeh.

Chaotic New Naira Banknote Shortages Causes Bank Queues

Positive Developments Follow Nigeria’s Free Floating Forex Market To Harmonize Exchange Rates

In 2008, a shipment containing one million tons of diesel set sail, heading for the shores of Nigeria. The owner of the vessel, Femi Otedola, Chairman of Forte Oil, a petroleum and power generation company, had grown the company to one of the largest in Nigeria, with over 500 gas stations, according to Forbes. The growth had been rapid and profits were at an all-time high. Then disaster struck.
“I had about 93 percent of the diesel market on my fingertips. All of a sudden oil prices collapsed and I had over one million tons of diesel on the high seas and the price dropped from $146 to $34,” says Otedola.
That was only the beginning of his problems. The naira was subsequently devalued and interest began to skyrocket. When the dust settled, Otedola had lost over $480 million due to the plunge in oil prices, $258 million through the devaluation of the naira, a further $320 million due to accruing interest and then finally $160 million when the stocks crashed.
“I had two options, either to commit suicide or to weather the storm. I decided to weather the storm. I just knew it was a phase I had to go through. You see God prepares you for greater things and of course experience is the best teacher so I had to learn my lessons. I took the bitter pill,” he says.
<img loading="lazy" decoding="async" class="alignleft size-medium wp-image-5295" src="/wp-content/uploads/2017/05/c-202x300.jpg" alt="" width="202" height="300" />
Otedola was now $1.2 billion in debt. He sought solace in the only thing that had set him on the path to discovering oil, destiny.
“You cannot compete with destiny, so it was my destiny to make billions every month and lose billions as well. I said to myself ‘I was not going to have friends and enemies, I was only going to have competitors.”
At the age of six, Otedola had already discovered his knack for business. He would provide manicure and pedicure services to his father and his friends and write them a receipt for payment. On his birthday, while all his friends wanted toys, Otedola asked his father for a briefcase instead. His father, Michael, as the Govenor of Lagos State, was a respected man. Now, his son’s public fall threatened to destroy that name.
“After I lost the money, something that struck me was that my father had always been my role model in life and the first thing I had to do was to protect his name. He had a policy; honesty was the best policy, so I had to protect that name and his integrity.”
Just after the global banking crisis had struck, the Nigerian government established the Asset Management Corporation of Nigeria (AMCON) to buy up distressed loans. Otedola’s loan was sold to AMCON, by the bank he blamed for his demise.
“Experience is the best teacher. I didn’t have a proper structure and I also put the blame on the banks for not advising me. All they were interested in was the profits. They were not interested in sustainability of the business, they were short-sighted and all they were interested in was throwing money at me. So they never advised me,” says Otedola.
The banks had to shave off about $400 million from the debt leaving Otedola $800 million in the red. AMCON offered him a restructuring deal, which Otedola declined. He opted instead to repay what he owed and start all over again.
“So we got a reputable firm to value my assets. I had about 184 flats, which I gave up. I was the largest investor in the Nigerian banking sector, which I gave up, I was also a major shareholder of Africa Finance Corporation and I was the chairman of Transcorp Hilton. I was a shareholder in Mobil Oil Nigeria Limited, the second largest shareholder in Chevron Texaco, Visafone and several companies which they valued, and I had to give up to repay the debt.”
Otedola was left with two properties, his office space and a 34%-stake in African Petroleum, which he rebranded, to Forte Oil in 2010. In 2014, Otedola bounced back to reclaim his place on the FORBES rich list and currently has a net worth of $1.8 billion according to the FORBES wealth unit in the United States. These days, he is much wiser; there are systems in place to prevent a similar collapse of his mammoth oil empire.
According to the mogul, the day he lost everything was the day he learned his biggest lesson. It taught him that he could overcome anything.

Tag: Naira

FORBES AFRICA SOCIAL MEDIA

FX Pressure Persists As Nigerian Naira Hits ₦1,145 Per Dollar On Parallel Market

Fitch Ratings Warns Of Further Nigerian Naira Devaluation As Exchange Rate Challenges Persist

Naira Hits Historic Low At ₦1,005 To $1 In Parallel Market, Raising Concerns Amid Economic Challenges

Nigeria’s Sliding Currency Leaves Foreign-Backed Startups In Limbo

Positive Developments Follow Nigeria’s Free Floating Forex Market To Harmonize Exchange Rates

‘I Took The Bitter Pill’