Staff Writer
The new administration in Africa’s largest economy thinks that Nigeria’s central bank’s decision to eliminate its skewed foreign exchange rate will help attract investors and stabilize the local currency.
The new administration in Africa’s largest economy expects that Nigeria’s central bank’s decision to eliminate its skewed foreign exchange rate will help entice investors and stabilize the local currency.
The Central Bank of Nigeria’s decision on Wednesday caused the naira’s value to drop by a record amount, to 755 to the dollar.
It has since made some progress.
According to observers, the action symbolizes the changes that the incoming president, Bola Tinubu, has promised to implement in order to strengthen the faltering economy.
Banker and resident of Legolas Samuel Badejo said the improvements appear to be favorable, but he is still wary about the outcomes.
Badejo stated, “I don’t want us to judge him (Tinubu) early because he has started behaving; we simply want to see what he’ll do for the first 100 days.
With the official exchange rate set by the central bank and a much higher unofficial rate dictating the price of imported goods like wheat, which are priced in dollars, Nigeria has long operated several exchange rates for the naira.
The central bank will no longer control the currency rate; instead, the market will. Analysts predicted on Thursday that this reform would increase capital inflows and stabilize an economy hammered by high inflation.
However, it is also anticipated to increase the cost of imported goods, which might have a negative impact on many in a nation that depends largely on imports.
The fact that some of the government borrowings are in U.S. dollars, according to Sam Chidoka, CEO of Kairos Capital, will cause the “total debt to GDP” to grow as well.
Due to Nigeria’s severe dollar scarcity, overseas investors were likewise prevented from accessing foreign funds and were instead compelled to sell their foreign currency to the central bank at the official rate.
Numerous foreign companies have been impacted by this, notably major airlines, whose revenues stuck in Nigeria as of June of last year were $450 million.
In his campaign platform, Tinubu promised that his “economic policies shall be guided by our desire for a stronger, more stable Naira founded upon a vibrant and productive real economy.”
Godwin Emefiele, the governor of the central bank, was criticized for pushing new currency notes, which resulted in a significant shortage of cash for people to pay for their basic requirements. Shortly after taking office, Tinubu removed Emefiele.
He was later taken into custody.
Additionally, Tinubu eliminated gasoline subsidies, making it necessary for citizens to pay much more for the fuel required for travel and to run household generators.
Given the current currency devaluation and the much higher foreign exchange rate, it is anticipated that import prices for goods like food will increase.
The Nigerian president, meantime, on Thursday launched a significant economic committee that advises him on the nation’s economic matters and is led by Vice President Kashim Shettima.
The leader of the country’s anti-graft agency was also put on administrative leave by Tinubu due to allegations of abuse of power.
Following “weighty allegations of abuse of office leveled against him,” Abdulrasheed Bawa was placed on indefinite administrative leave from his position as chairman of Nigeria’s Economic and Financial Crimes Commission, according to a statement from the Nigerian presidency.
Bawa was arrested by the nation’s secret police in Abuja, the capital, just after he was suspended.
Peter Afunanya, a spokesman for Nigeria’s Department of State Services, claimed that the action was connected to the investigations into his activities.
Another local and travel advisor, Prudent Odeh, claimed that the modifications showed that Tinubu was “trying to eliminate those people that are not competent in their position” and ultimately creating a “better Nigeria.”
