The Federal Government has started taking steps to close the dollar supply gap that is causing the naira to fall freely in order to maintain the gradual appreciation of the currency versus the dollar, which reached a record low on Tuesday of $1,310/$, according to Punch.
Top government sources revealed that in an effort to get people hoarding dollars, businesses, and those determined to have robbed the treasury to “bring their monies to the mainstream market,” the government was reaching out to these groups of people. It was discovered that the government was prepared to take any necessary action to address the issue.
According to a senior White House official, the initiative served as the foundation for two recent Executive Orders that President Bola Tinubu issued.
The Federal Government issued the instructions as part of its efforts to maintain market stability, guarantee liquidity in the country’s foreign exchange market, and maintain the naira’s appreciation after it had declined in value relative to the US dollar in recent weeks.
Even though the orders are currently in effect, they have not yet been gazetted, thus it is uncertain what they contain and the implications of the interventions.
Finance Minister and Coordinating Minister of the Economy, Mr. Wale Edun, said during a panel discussion at the 29th Nigeria Economic Summit last week in Abuja: “Mr. President announced that he had taken measures to ease illiquidity in the forex market, which we know is very problematic at this time.
“There are several reasons why there is no supply, which causes the market to be illiquid and prevents it from operating as intended. The President has proposed a solution in the form of an executive order that permits all cash in the domestic economy to lawfully enter the formal money supply during a period of forbearance.
“In addition, an additional executive order permits the issuance of foreign currency instruments domestically, thereby creating an incentive for them to provide foreign exchange from any source.”
According to credible sources, this leniency is intended to act as a form of pardon for individuals and organisations holding onto their money.
The senior government official said to our correspondent that the Executive Orders’ specifics were purposefully withheld from the public to avoid creating unnecessary controversy that could divert attention away from the administration’s objective of stabilising the value of the naira.
“We intentionally withheld the details,” the official stated. We are conversing with enough stakeholders to attract their money to the mainstream market. We are attempting to make it very evident to these individuals—who possess billions of dollars in cash—that they have the ability to contribute to the economy and withdraw funds quickly as needed.
“Those monies must be reinserted into the system. We are therefore attempting to determine how to regularise them.
The source added that the government would not mind reaching out to people who are thought to be undermining the economy and that its approach to those hoarding cash was in the best interests of Nigerians.
The source stated, “I think we will have to roll up our sleeves and interact with those we perceive to be destroying the economy at the highest levels if truly we have decided to revamp the economy and get Nigerians out of poverty through a practical end.”
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“The cost is justified. Reaching out to crooked people will be necessary. The completion of tasks is what counts. The $100 billion will transform the nation.
President Tinubu reassured the business sector during the 29th National Economic Summit that important plans were in place to increase foreign exchange availability, allaying their fears.
Tinubu declared that his government would uphold the terms of any valid agreement pertaining to the country’s foreign exchange commitments.
He had said, “The difficulties that a number of you are having in the financial markets are not lost on my administration. I can ease these worries by pointing out that we have a clear view of the extra foreign exchange liquidity needed to boost investor confidence.
He gave investors his word that his government will respect the integrity of all valid contracts as part of his pledge to establish justice and the rule of law in Nigeria.
In particular, he stated, “With regard to the government’s foreign exchange obligations, all forward contracts will be honoured and a mechanism has been established to guarantee that these commitments are fulfilled in good faith.”
The Nigerian National Petroleum Company Limited said in August that, in order to stabilise the foreign exchange market and maintain the naira, it had obtained a $3 billion loan for the repayment of crude. This was prior to its most recent involvement.
“The NNPC Ltd. and AFREXIM Bank have jointly signed a commitment letter and Termsheet for an emergency $3 billion crude oil repayment loan,” the company stated in a brief statement posted on its X account. The agreement, which was signed today at the bank’s Cairo, Egypt, headquarters, will allow the NNPC Ltd. to support the Federal Government in its current monetary and fiscal policy changes intended to stabilise the exchange rate market with some immediate disbursement.
However, the naira had continued its downward trend in spite of the initiative, which had led to an increase in the cost of goods and services.
The majority of people and businesses obtain their foreign exchange on the parallel market, where prices typically trade at N1,000, whilst the I&E window has remained comparatively stable around N770 to 780/$.
The naira reached a new low on Tuesday, exchanging for N1,310/$, compared to N1,190/$ on Monday on the parallel market.
The naira saw a slight increase in value on Wednesday when it traded for N1,300 on the black market. On Thursday, it held the rate steady.
However, the naira saw modest improvement on Friday, rising to N1,250/$. It continued to appreciate on Friday, trading for N1,150/$.
The abrupt increase in value of the naira was reported to have caused financial losses for numerous traders. Some observers had linked the naira’s advances to the Supreme Court’s confirmation of Tinubu’s victory.
The finance minister announced at the NES summit on Monday that Nigeria was anticipating a $10 billion foreign exchange inflow in the coming weeks. “There is a line of sight of $10 billion worth of foreign exchange in the relatively near future, in weeks rather than months,” the minister said, citing the supply of foreign exchange through NNPCL, increased production, decreased expenditure from transactions such as forward sales, and our discussions with sovereign wealth funds, that are ready to
Long-term gains – ABCON
The naira’s return to growth, however, is sustainable, according to the Association of Bureaux De Change Operators of Nigeria, as the previous depreciation was unjustified.
In an interview with Sunday PUNCH, ABCON President Dr. Aminu Gwadabe stated that among other issues, the recent decline was brought on by a decline in trust in the local currency.
“The naira’s recovery has demonstrated that there is no factual basis for its recent senseless depreciation,” he said. Loss of confidence, currency substitution, and speculation are the causes of the depreciation.
“Therefore, I applaud the government for their success in fostering market confidence. It’s also crucial to remember that the naira is still finding its footing because it is challenging to regulate price mechanisms by feat in a market that is liberalised and competitive, but rather through the interaction of supply and demand.
“In my opinion, the market will continue to rebound despite the resistance of the speculators who are suffering significant losses as a result of the development, since both the monetary and fiscal policies have kept the prospect of massive liquidity infusions from the proceeds of NLNG dividends and access to bilateral financial assistance alive.”
The naira was purchased and sold for 1,140/$ and 1,150/$ on Saturday, according to information received from Aboki Forex. On Tuesday, it had traded at 1,310/$ on the parallel market.
