President Bola Tinubu unveiled a comprehensive plan to bolster Nigeria’s foreign exchange liquidity during the 29th Nigerian Economic Summit in Abuja. He assured the business community of additional foreign exchange liquidity, aiming to reestablish confidence in the market.
Tinubu outlined eight top priorities for his administration, spanning from poverty eradication to economic growth and job creation. These include access to capital, inclusivity, security, fairness, rule of law, and robust anti-corruption measures. The government has also implemented various initiatives to jumpstart the economy, such as a substantial N5 billion intervention for small businesses and the agricultural sector.
The Minister of Finance, Wale Edun, disclosed an imminent influx of around $10 billion in foreign exchange, expected to arrive in weeks rather than months. This injection of funds is anticipated to clear the existing foreign exchange backlog, and provide stability to the naira.
Edun further outlined measures taken to alleviate liquidity issues in the forex market. President Tinubu signed executive orders, allowing for cash in the domestic economy to enter the formal money supply and enabling the domestic issuance of foreign currency instruments. These steps are intended to encourage the availability of foreign exchange from various sources.
To address the persistent issue of illiquidity in the forex market, the Federal Government plans to implement automation across all transactions. This strategic move is aimed at curbing wide arbitrage and penalising naira speculators.
Edun acknowledged that the foreign exchange market is currently ineffective due to this liquidity challenge, emphasising the government’s commitment to rectify the situation. He said that all legitimate transactions will be governed by the authorities within the formal foreign exchange market, making any unauthorized dealings illegal and subject to penalties.
The Central Bank of Nigeria, represented by Governor Yemi Cardoso, assured a dedicated focus on achieving price stability in the foreign exchange market. The aim is to establish a market that operates predictably, transparently, and without opacity. Efforts to unify the foreign exchange market have been made, resulting in increased revenue inflows. Additionally, the Central Bank is preparing a comprehensive document outlining the rules governing the foreign exchange market.
The government plans to expand the official currency market to include various “legitimate” participants, such as bureau de change and financial technology companies. According to Taiwo Oyedele, the chairman of the presidential committee on fiscal policy and tax reforms, the current market structure is inadequate, lacking sufficient liquidity even when combining the parallel and official markets.
Despite government promises, the naira experienced further devaluation in both the parallel and official markets. Bureau de Change Operators reported buying the dollar at NGN1,210 and selling it at NGN1,235 on Monday, a decrease from the NGN1,190 exchange rate on the preceding Friday.
This ongoing depreciation of the naira is attributed to a shortage of available dollars, a situation that must be urgently addressed through measures like combating oil leakages and engaging stakeholders to curb speculation.