to To maintain the steady appreciation of the naira against the dollar, which hit an all-time low of $1,310/$ on Tuesday, the federal government has begun moves to bridge the dollar supply gap that facilitates free fall. sunday punch Have learned.
Our correspondent heard from senior government officials that the government is reaching out to individuals and institutions hoarding dollars, as well as those found to have looted the treasury, to “bring that money into the mainstream market.” I learned. It turns out that the government is ready to do whatever it takes to solve the problem.
A well-informed source in the presidential palace said this initiative was at the heart of two executive orders recently signed by President Bola Tinubu.
The order is part of the federal government’s measures to ensure liquidity in the domestic foreign exchange market, stabilize the market and sustain the appreciation of the naira, which has depreciated against the dollar in recent weeks.
The order is currently in force, but its content and the impact of the intervention are not yet known as it has not been published in the official gazette.
Speaking at a panel session at the 29th Nigeria Economic Summit held in Abuja last week, the Minister of Finance and Coordinating Minister for the Economy, Wale Edun, said: “The president announced that he has taken steps to alleviate illiquidity in the foreign exchange market, which we know is very problematic at the moment.
“The market is illiquid. It is not functioning properly because there is no supply, but there are many reasons for that. He signed an executive order that effectively allows Japan to participate in the country’s currency supply under tolerance.
“In addition to this, there is also another executive order allowing domestic issuance of foreign currency products, thereby providing an incentive to provide foreign currency from any source.”
This leniency, as Sunday Punch has certainly learned, is a kind of amnesty for people and organizations hoarding dollars.
A senior government official told our correspondent that the details of the executive order were deliberately withheld from the public to avoid creating too much dust that could distract the administration from its goal of stabilizing the naira. .
The official said, “It was intentional that the details were not disclosed.” We are in talks with enough parties to bring capital into the mainstream market. These people hold billions of dollars worth of cash, and we are trying to send them a clear message that even as we inject money into the economy, they can withdraw it quickly when they need it. I am.
“We need to get those funds back into the system. So we’re looking at how we can regularize them.”
The official also said the government’s approach to such dollar hoarding is in the interest of Nigerians, adding that it does not mind reaching out to those who are believed to be destroying the economy.
The source said, “If we are really determined to rebuild the economy and lift Nigerians out of poverty for a practical purpose, we should roll up our sleeves and engage with those who are believed to be destroying the economy at the highest levels. I think we need to have a dialogue.” .
“It’s worth the sacrifice. We’re going to have to reach out to the corrupt. What matters is that things get done. $100 billion will change life in this country.”
At the 29th National Economic Summit, President Tinubu allayed the concerns of the business community and assured that important plans are underway to improve foreign exchange liquidity.
Mr Tinubu said his administration would respect all legal contracts regarding the country’s foreign exchange obligations.
He declared: “My Government is not turning a blind eye to the challenges some of you are facing in the financial markets. By making it clear that you have a positive outlook, you can allay these concerns.”
He assured investors that in line with his commitment to fairness and the rule of law in Nigeria, the government would uphold the sanctity of all lawful contracts.
He said: “All futures contracts entered into by the Government, particularly as they relate to the Government’s foreign exchange obligations, are respected and a framework is in place to ensure that these obligations are properly fulfilled.” .
Prior to the latest intervention, the Nigerian National Oil Company revealed in August that it had secured a $3 billion oil repayment loan to support the naira and stabilize the foreign exchange market.
“NNPC Ltd. and AFREXIM Bank have jointly signed commitments and terms and conditions for a $3 billion crude oil emergency repayment loan,” X Account said in a brief statement. The signing, which took place today at the bank’s headquarters in Cairo, Egypt, provides for immediate payments to enable NNPC Ltd to support the federal government’s ongoing fiscal and monetary policy reforms aimed at stabilizing foreign exchange markets. become. ”
However, despite these efforts, the naira has been in steady decline recently, leading to higher prices for goods and services.
The I&E window remained relatively stable at around 770 to 780 Naira/$, while the parallel market, where most individuals and businesses trade forex, was trading above 1,000 Naira.
On Monday, the naira traded at 1,190 Naira/$ on the parallel market, hitting an all-time low of 1,310 Naira/$ on Tuesday.
On Wednesday, the naira traded at 1,300 naira in the parallel market, gaining slightly. The rate remained unchanged on Thursday.
However, on Friday, the naira registered a slight increase as it rose to Nera 1,250/$. On Friday, it maintained its rise and stood at 1,150 naira/dollar.
The sudden rise in the naira is said to have caused many speculators to suffer losses. Some analysts linked Naira’s gains to the confirmation of Tinubu’s victory by the Supreme Court.
Speaking at the NES Summit on Monday, the Finance Minister said Nigeria is expected to receive $10 billion in foreign exchange inflows in the coming weeks, adding: “The provision of foreign exchange through the NNPCL, increased production and reduced expenditure through transactions such as forward sales. 10 billion in the relatively near future, within weeks rather than months, according to our discussions with sovereign wealth funds who are ready to invest and provide advances in parallel with their investments. It is expected that a considerable amount of foreign currency will be raised.
Sustainable profits – Abcon
Meanwhile, the Money Changers Association of Nigeria has said the return of the naira to its growth trajectory is sustainable as the recent devaluation experienced is not realistic.
ABCON Chairman Dr. Aminu Gwadabe said in an interview with Sunday Punch that the recent decline was due to a loss of confidence in the local currency, among other challenges.
“The naira’s rebound shows that there is no empirical evidence to support the recent reckless decline,” he said. Currency devaluations result from speculation, currency substitution, and loss of confidence.
“Therefore, I pay tribute to the authorities’ ability to bring confidence to the market. I also respect that in a competitive and liberalized market, it is difficult to control the price mechanism due to the interaction of market demand and supply. It is also important to note that Naira is only trying to find its place.
“Personally, I believe that as both fiscal and monetary policy continue to renew expectations for huge liquidity injections from NLNG dividends and earnings, speculators recording huge losses from development Despite resistance, we expect the market’s recovery trajectory to be sustained.” Access to bilateral financial assistance. ”
According to figures obtained from Aboki Foreign Exchange on Saturday, the naira was bought and sold at 1,140/$ and 1,150/$. It was trading at 1,310/$ on the parallel market on Tuesday.
Increase in external reserves
Figures on the movement of foreign exchange reserves obtained from the Central Bank of Nigeria show that the country’s foreign exchange reserves increased from $33.249 billion on October 19, 2023 to $33.326 billion as at the end of October 26, 2023, in a week. recorded an increase of $76.82 million. 2023.
The company lost $841.75 million in three months, from $34.07 billion as of July 7, 2023 to $33.23 billion as of October 5, 2023.
Gwadabe said the removal of capital controls on the 43 prohibited items in line with Article 8 of the International Monetary Fund will allow policymakers to heed further engagement from the Brenton Woods institutions.
This positive impact will occur in the short term, and to ensure its sustainability, it is necessary to “democratize and centralize the foreign exchange market and leverage BDCs to moderate and rectify the role of the foreign exchange market.” Yes,” he said.
“The inclusion of BDC in the new foreign exchange reform remains the greatest miracle to come in the fight against speculation, hoarding and substitution of national currencies.”
According to him, BDCs, through digitization, could play an important role in achieving apex banking demand measures, especially transaction monitoring mechanisms, and true utilization of available and acceptable dollar sources for operations. .
Economists’ reaction
Dr. Muda Yusuf, an economist and chief executive officer of the Center for the Promotion of Private Enterprise, said the strength of the naira was due to the Supreme Court ruling that brought to an end the litigation over the presidential election. He said the ruling removed economic uncertainty.
“Confidence levels among economic actors may be improving,” he said. As you know, there was a Supreme Court ruling that ended the riots and all the disputes over the election. This removed some uncertainty from the economy.
“The statements made by the President on efforts to increase liquidity in the foreign exchange market may also have affected confidence levels and affected expectations, as people believe that liquidity will improve and the naira will appreciate. Because if you have expectations, people will immediately start unloading their funds.”They have dollars at a lower rate.
“As a result, this is positive for the economy. If this trend continues, it will have a positive impact on inflation and prices. If we can maintain this trend.”
Akpakpan Edet, a professor of economics at the University of Uyo, said the rate hike had forced some people to adjust their naira demand. However, he pointed out that temporary gains alone are not enough and a holistic approach is needed to save the naira.
He said, “Everything about exchange rate fluctuations is tied to supply and demand in the foreign exchange market. Again, the value of the naira against the dollar has become so high that some people cannot afford it. People are being forced to make adjustments due to the situation. The supply of naira to the foreign exchange market is also starting to dwindle, which makes these small adjustments possible. But it is not what we need. We need much more significant reductions.
“We need to seize the opportunity to reduce the demand for foreign goods. We need to reduce the demand for dollars. We could make the naira more valuable.”
Sherifudeen Tera, an economist and professor of economics at Olabisi Onabanjo University, said:
“All currencies will rise and fall. For example, over the weekend there was less trading so the naira rose, but by Monday there will be more trading so the naira will fall. Hold out for a few days. If you can, you’ll be saying something important.”
