The Naira sank further in the foreign exchange market, last week, reaching a record high of ₦955 to US$1 on Thursday, August 10, 2023, sending shockwaves through the Nigeria business sectors.
To keep control of the currency and the economy, President Bola Tinubu and the Central Bank of Nigeria must act quickly, creatively, and pragmatically.
Indeed, the Naira has been depreciating more rapidly since Tinubu pressured the CBN to unify the currency rates two months ago.
The twin objectives of facilitating a “realistic” rate and closing the substantial arbitrage gap between official rates and informal market rates have proven to be difficult to achieve.
At the official exchange rate of ₦767.76/$, the difference and, thus, the potential for illicit arbitrage, accelerated from ₦100/$ to ₦200/$.
With high inflation and business contraction, the Naira is on track to crest the ₦1,000/$ mark and beyond soon, raising real fears that the CBN could lose control of the Naira with dire consequences.
The IMF added to the anxiety last week, saying existing “loose fiscal and monetary policies” make it difficult for the Naira to stabilise.
Wale Edun, Tinubu’s longtime economic adviser and ministerial nominee, signposted ₦700/$ as the realistic rate, saying the higher rates are not backed by the fundamentals of the economy.
The Economist Intelligence Unit’s forecast of a ₦1,000/$ rate up till 2027 now appears overly optimistic. Things could get really nasty well before then.
People Also Read: Nigeria Has No Excuse Not To Have Stable Forex Rate -Wale Edun
Amidst the troubles, a few things experts are recommending are:
Tinubu needs to switch from his unfocused, poorly thought-out, and uncoordinated initiatives to deliberate, well-thought-out, and all-encompassing economic strategies.
The CBN should support the currency market for a few weeks in order to maintain control over the naira and prevent hyperinflation.
It should stop BDCs and errant banks from engaging in illegal round-tripping and arbitrage.
Also, it should monitor operators and rapidly and forcefully punish infractions and offenders there.
There should be stronger cooperation with other regulatory authorities, the anti-corruption agency, and law enforcement agencies.
This Is How Government Policy Is Affecting Firms In Nigeria