(Ecofin Agency) - The external financial position of Nigeria is currently threatened by a British court decision, which requires the country to pay damages of $9 billion. This was in compensation for a gas company incorporated in the UK which was allegedly disadvantaged in a project it was developing in southern Nigeria.
The implementation of such a decision could constitute a major external shock for the West African country, which must struggle to maintain its level of foreign exchange reserves above $43 billion. On a visit to London, Godwin Emefiele, the Governor of the Central Bank, said he would not give up on the case, and that an appeal against the decision had already been lodged. With the help of the South African banking group Standard Bank, he invited British fund managers to invest in naira-denominated bonds.
The Nigerian currency is facing pressure on the international foreign exchange market with a further decline against the US dollar. The Central Bank’s reference rate is at 306 naira per $1 but the market-defined rate has deteriorated sharply to 363 naira for a dollar, down by more than 18%.
Another pressure is the weak ability of the country to withstand potential external shocks, according to US Rating Agency Moody's. In need to address the issue, President Buhari has already engaged a number of political commitments that are expected to bear good results.