In a strategic move to bolster Nigeria’s economic resilience, the Central Bank of Nigeria (CBN) recently implemented measures to further float the Naira in the foreign exchange market. This decision, echoing a similar initiative from eight months ago termed Naira liberalization, has triggered a spectrum of opinions within the country’s economic landscape.
The apex bank emphasized transparent pricing and trading of the Naira, reiterating the “willing buyer and willing seller” policy to commercial banks. However, the initial market response was marked by a decline, with the Naira plummeting to N1,500 per US dollar before stabilizing at N1,419.86.
In late January, the CBN introduced various policy interventions, including Financial Markets Price Transparency and FMDQ notice of FX Market Rate Pricing Methodology. Consequently, the Naira depreciated from N891.90 per US dollar to N1,409.86 on January 26. The apex bank also implemented measures such as Harmonization of Reporting Requirements on Foreign Currency Exposure of Banks and Removal of Allowable Limit of Exchange Rate Quoted by International Money Transfers Operators to stabilize the Naira by increasing supply.
CBN Governor, Olayemi Cardoso, explained in a recent interview that these interventions aim to prevent the pitfalls of failed policies and ensure effective resource allocation to benefit the populace. Despite initial concerns, the Naira has marginally appreciated against the Dollar three times since the implementation.
In response to the surge in US dollar supply at the official foreign exchange market, which rose by 180.59% to $440.13 million, there have been diverse opinions. Muda Yusuf, Director of the Centre for the Promotion of Private Enterprise, called for a reversal of the import duty exchange rate, expressing concerns about the impact on Nigerians reliant on imported goods.
Former President of the Chartered Institute of Bankers of Nigeria, Mazi Okechukwu Unegbu, supported the CBN’s interventions, highlighting the undervaluation of the Naira. He urged Nigerians to endure short-term challenges by prioritizing local goods and services to strengthen the Naira.
CEO of SD & D Capital Management, Mr Idakolo Gbolade, observed that the CBN’s measures aimed to devalue the Naira for stabilization. However, he emphasized the need for critical examination and proper implementation to achieve desired results.
Prof Godwin Oyedokun from Lead City University identified falling oil prices, overdependence on imports, and a decline in foreign investment as key challenges to the Naira. He proposed solutions such as economic diversification, encouraging foreign investments, promoting export-oriented industries, enhancing forex reserves, fiscal discipline, improving transparency, and strengthening regional trade.
In conclusion, the CBN’s recent actions, coupled with collaborative efforts from various sectors, aim to rejuvenate Nigeria’s economic landscape and create a more stable and sustainable future.