On Wednesday, January 26, 2022, the US dollar traded at NGN575 at the parallel market while hyperinflation has made the value of the Nigerian currency worthless in its purchasing power.
As a result of this and other issues, the Chief Executive Officer (CEO) of Nigeria Economic Summit Group (NESG), Mr. Laoye Jaiyeola, said it isn’t advisable for anyone to store their money in naira.
He stated this at the commencement of the NESG 2022 Macroeconomic Outlook Report in Abuja.
The Chief Executive Officer (CEO) of Nigeria Economic Summit Group asked:
“Why should you tell anybody in Nigeria to store his money in naira?”
He said the interest rate on the naira in some places is lower than the interest rate of some foreign currencies.
Opposed To Buhari’s Fiscal Policy
In July 2021, the Buhari-led government stopped the sales of the forex to its over 5,000 Bureau De Change operators, thereby causing serious crises in the FX market.
The NESG DG stated that the challenge to the poor forex supply in Nigeria could be attributable to the lack of diversification of forex sources.
He faulted the APC-led government for relying on proceeds from the sales of crude oil export and reckless foreign borrowings.
The Way Forward
The problems, of course, are not without solutions. Jaiyeola advised the Buhari’s government to put in place a clear foreign exchange policy to gain the confidence of investors and the need to determine the fair value of the Naira.
While the CBN rate is pegged at NGN415.82 on its official market, it’s NGN575/$1 at the parallel market which the CBN consistently said is illegal.
Even commercial banks do not have a unified exchange rate. While it’s NGN480 at GtBank, Zenith Bank sells at NGN490/$1.
Recently, the external reserves of Nigeria have continued to dwindle while the Central Bank of Nigeria (CBN) resorted to exchange rate devaluation and forex rationing among end-users.
NESG report says:
“These challenges send wrong signals to prospective investors who are more concerned about the safety of their investments (particularly forex repatriation at maturity of investments, in addition to returns).”
Access To Forex at Official Market
In November 2021, Godwin Emefiele’s led CBN announced the launch of Trade Monitoring System (TRMS) for end-users like paying foreign school fees, medical bills, PTA through Form A on the digital platform.
Unfortunately, some students complained that they had to wait for weeks before getting approval for their application. Delay has been the major problem of the e-Form A application process.
For instance one of the applicants who submitted an application to purchase forex to settle his education fee abroad lamented that the delay could make him lose admission.
“I applied for e form A since 14th of January, 2022, but to date, my application has not been approved. Please what do I do because the deadline for the payment is 28th. Please help me out.”
NESG Recommendations on AfCFTA
Some of the recommendations made by the NESG on the African Continental Free Trade Area (AfCFTA) include:
- Fixing of local refineries
- Effective border control
- Removing capital controls
- Prioritising non-oil forex sources
- Enhancing the quality of import substitutes
- Encouraging the inflow of stable investments
- Constructing of new refineries to boost the availability of foreign exchange
Reliance on Dangote Refinery
For years, the Federal Government has been importing refined petroleum products while it left its refineries unproductive and continues to budget billions of naira for its yearly maintenance and paying billions of naira as subsidy which is characterised by endemic corruption.
Speaking on the plan of the government to suspend the removal subsidy, Minister of Petroleum (state) Timipre Sylva had on January 24, 2022, who addressed the press in Abuja stated that the government was banking on the launch of Dangote Refinery, owned by the richest African man, to reduce importation of petroleum products.
He said, “What we have to do now is to continue with the discussions we are making, in terms of putting in place a number of measures, one of which is the deployment of an alternative to the Premium Motor Spirit (PMS) and also the rollout of enhanced refining capacity in the country, including the 650,000 barrels per day Dangote refinery,” ThisDay Newspapers quoted him as saying
He promised that the government had planned to embark on the rehabilitation of the four national refineries that have a combined capacity of 450,000 barrels per day, the say promise the government made before the 2015 election.
At the time of this report, no government official had reacted to the NESG recommendations.