•As Naira hits N702/$1 at I&E window
By Chinwendu Obienyi
After trying to unify Nigeria’s multiple exchange rates, the Bola Tinubu-led administration should focus on boosting the supply of FX into the market, economic experts have urged.
According to those who spoke to Daily Sun, making the right policy announcements, personal changes, working with the right team and then eking out institutional reforms which will outlast various administrations will be the best thing for the Tinubu-led government.
This is coming after the Central Bank of Nigeria (CBN) allowed the market to determine the naira exchange rate for the first time in years on Wednesday, in a move that has been widely cheered by investors.
The naira had weakened by over 20 per cent to an intra-day rate of between N750 and N755 per US dollar before strengthening to N644 at the end of Wednesday’s trading, according to data obtained from the FMDQ.
Further data revealed that the Naira at the investors and exporters’ (I&E) window closed at N702/$1 while at parallel markets, it closed at N760/$1.
The exchange rate had tightly hovered at around N460/$1 dollar since the beginning of the year. The development means buyers and sellers of foreign currency in the official FX market are now allowed to quote rates they find comfortable in the FX market, as against previous practice where rates were dictated by the CBN.
Reacting to the current development, the Managing Director, Financial Derivatives Company (FDC) Limited, Bismarck Rewane, noted that the free float of the Naira is the beginning of a process, adding that there are foundational and structural problems in the Nigerian economy.
Rewane said Nigerians are still in shock with the policies being implemented swiftly while adding that institutional reform is much more important than policy change.
He said, There is a demand structure and then a supply structure. Because the supply was short and the price was manipulated downward, there was a gap and so what you have done is to move the price up so that excess demand will shrink and that automatically translates into an optimization of supply. But again, that does not increase the supply of FX and so when people begin to take the seriousness of a policy, then they will bring in money gradually.
We are seeing the right things, doing some of the right things and eventually we will get to a point where our words, deeds, thoughts will all be aligned. Therefore, you will not need to tell everybody, the money will come in and that will give the supply” he explained.
Rewane who also doubles as an economic analyst, however urged the Tinubu led government to keep making right policy announcements, make personal changes, work with the right team and then eke out institutional reforms which will outlast various administrations.
For his part, Partner and Chief Economist at PwC Nigeria, Andrew Nevin, said, the economy is getting positive triggers due to Tinubu’s inaugural speech and added that multiple exchange rates under the suspended CBN Governor blocked investments from coming into Nigeria.
When quizzed on what impact this would have on the economy, Nevin said, “This will therefore have a dramatic impact on the fiscal structure of the country when we get more investments, more fair use of our resources and all this will strengthen the exchange rate”