Nigerian banks delay loan repayments due to dollar shortage

Nigeria's central bank has tightened restrictions on the flow of dollars to domestic lenders, forcing them to delay hard currency loan and trade repayments to foreign banks and increasing the risk of default, bankers say.

Reeling from the slump in oil prices, the central bank began last year to impose ever stricter dollar curbs to conserve its reserves, which stood at $27.82 billion on March 1, their lowest level in more than 11 years.

Now, banks seeking dollars to repay letters of credit (LCs) to foreign banks have to submit bids to the central bank, imposing extra barriers to hard currency access - to the consternation of foreign institutions.

Previously, the delays have only been for a day or two, and have not been a cause for alarm for the international lenders.

But now, repayment delays have swelled to over a week in some cases, bankers say.

"We have had delays for almost a year," one senior Nigerian banker, who asked not to be named, told Reuters. "But we have capacity to pay what we owe. The delays are understood by both parties to be due to exchange controls."

Banking sources estimate outstanding LCs at $500 million.

The central bank has rationed dollars since oil prices began to fall, selling around $250 million a week, according to bankers. This is half what it used to sell when oil prices were high, making sourcing dollars to repay matured LCs a headache.