Mobilizing Diaspora Bonds, ramping up crude oil production and providing the enabling fiscal/monetary policy framework are key steps the government must take to boost foreign exchange inflows into the Nigerian economy. Economists and Analysts made these points at a recent conversation to review 100 days of the administration of President Bola Ahmed Tinubu.
The conversation hosted by Nairametrics offered the opportunity to assess the reforms of the Tinubu administration, the challenges so far and the key steps required, especially in the foreign exchange management anchored by the Central Bank of Nigeria.
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In his intervention in the conversation, Mr Chika Mbonu, an analyst and MD/CEO of KSBC Advisory Partners Limited, stressed the need for a supply plug in the foreign exchange market. This was critical to achieving the country’s free market foreign exchange regime.
Mr Mbonu noted that Nigeria needs to ramp up crude oil production for the short term and take advantage of the favourable international price regime. He harped on policy coordination between the fiscal and monetary policy authorities to attract foreign direct investments, which can boost FX Inflows.
He warned that Nigeria is on the brink of fiscal bankruptcy, except drastic reforms are implemented and implemented. The financial expert emphasized the need for the government to expand its revenue base and reduce expenditure through cost-cutting measures.
The CEO of Graeme Blaque, Mr Zeal Akaraiwe, speaking on the foreign exchange market, believed there is a need for confidence building in the economy, driven by the right mix of policy and liquidity.
He added, “Currencies are tied to the net flows in the economy and policies that drive net flows into the economy should be a top priority to the fiscal and monetary authorities.” The analyst described the continued restriction of FX allocation to 43 items as bad signaling that negates the concept of a market-determined exchange rate mechanism.
Mr. Kalu Aja, a financial planner and economic strategy consultant, opined that the floated FX market is still not a willing buyer-willing seller market because of the restrictions on 43 items. He said the country needs a liberalized FX market that allows the CBN rate to compete with the parallel rate.
“As long as imports are cheaper than local production, the naira will never gain value,” Kalu Aja added. He stressed the need for Nigeria to learn from India, China, and Egypt to take bold steps in boosting FX inflows through diaspora bonds. He noted that it was important for the fiscal and monetary policy authorities to continue to sell Nigeria to the diaspora and engage more potential investors.
It will be recalled that on June 14th, 2023, the Central Bank of Nigeria announced the collapse of all multiple exchange rates in the market into the Investor and Exporters window. Three months later, the Naira weakened, and on September 26th, 2023, the parallel market saw the naira trading at N1,000/$1, unprecedented in the country’s history.
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At the 2023 edition of the Lagos Naira Conference organized by Arbiterz media, stakeholders called for policy clarity, transparency, and accountability in managing the foreign exchange system.
The new Central Bank Governor, Dr. Olayemi Cardoso, at the Senate Screening yesterday, set out verifying and clearing the over $5bn FX backlog and will provide a level playing field for all investors and stakeholders in the market. He also assured the Senate that his tenure will focus on evidence-based monetary policy driven by data.
