Economy

Tinubu’s government plans $10bn to stabilise naira as it depreciates further to N1200 per dollar at black market

Published

6 months ago

October 24, 2023

The Nigerian government under President Bola Ahmed TInubu has mulled a plan to raise $10 billion to address the country’s foreign exchange crisis that has sent the naira tumbling on both the official and parallel markets, worsening a cost-of-living crisis for businesses and households in Africa’s most populous nation.

Recall that since the announcement of the removal of subsidy by Tinubu in May, the Naira has lost 40% of its value in the exchange market causing more hardship for Nigerians.

As of press time, the Naira goes for 1150/1200 to one US Dollar on the black market.

Speaking at the 29th Nigerian Economic Summit in Abuja on Monday, Tinubu acknowledged the challenges faced by the business community in the financial markets and assured them of additional foreign exchange liquidity to restore market confidence.

He also emphasized his administration’s commitment to strengthening governance by establishing a performance and result-oriented public and civil service culture and structure.

He then assured Nigerians and investors that there is an ongoing plan to boost the country’s foreign exchange liquidity.

Buttressing the president’s stance, the Minister of Finance and coordinating of the economy, Mr. Wale Edun, stated that around $10bn of forex inflows expected within weeks rather than months.

Edun stated this during a panel session at the ongoing Nigeria Economic Summit.

He said, “In addition, from the supply of foreign exchange through NNPC, increased production, reduced expenditure, from transactions such as forward sales, from our discussions with sovereign wealth funds, that are ready to invest and provide advanced alongside that investment, there is a line of sight of $10bn worth of foreign exchange in the relatively near future in weeks rather months.”

The Minister also disclosed that the President had signed two executive orders geared towards ensuring liquidity in the forex market.

He said, “Mr. President announced that he had taken measures to ease illiquidity in the forex market which we know is very problematic at this time.

“The market is illiquid; it’s not functioning properly because there is no supply and there are various reasons for that. The solution that the President has put on the table is that he has signed an executive order that effectively allows under forbearance all the cash that is in the domestic economy to legally come into the formal money supply”

“Along with that, there is another executive order that allows domestic issuance of foreign currency instruments so that they will have the incentive to provide that foreign exchange from whatever source.”

In the near future, the Federal Government also plans to automate transactions in the entire foreign exchange market to tame wide arbitrage and punish naira speculators.

According to Edun, all dealings in the FX market, from the official to the money changers where huge arbitrage has consistently occurred, will be thoroughly monitored and offenders fished out and punished.

He admitted that Nigeria’s foreign exchange market is not functioning effectively due to illiquidity and that the government is prepared to do everything required to change the status quo.

“Foreign exchange market will simplified and reformed such that all legal and legitimate transactions will fall within the purview of the authorities and in the formal foreign exchange market. Anything outside that will be illegal, a criminal offence and will be punished,” Edun said.

In his comment, the Governor of the Central Bank of Nigeria Yemi Cardoso, assured that the apex bank, going forward, will take its objective of price stability “very seriously indeed.”

“We are going to come out with an elegant document that will tell you the rules,” the governor assured.

It was also disclosed that the apex bank is preparing a document that will set out clearly the rules of the foreign exchange market.

He noted that the central bank is focused on ensuring Nigeria has a market that is “predictable and without flip-flops.”

He added that while efforts to unify the foreign exchange market have not been perfect, they have led to more revenue coming into the country.

The governor also said he was expecting foreign investment inflow from foreign portfolio investors.

He added, “In due course, we will see the outcome. There are more difficult decisions to be made, but two very difficult decisions have been taken. Now, it’s a question of managing things to get to where we want to get to. And that is where we want to get to be a place where we have FX that is fixed for purpose. A FX that works for everybody. A FX market where you know the rules. A foreign exchange market where there are no policies flip-flops. An FX market that you can predict. That is what we do.”