The Nigerian government is working hard to seek dollar supplies from foreign investors as exchange rate volatility persists in the Wake of the Naira Unification
Reliable sources have informed Nairametrics that government officials in the Tinubu administration are vigorously pursuing strategies to secure dollar supplies, given the ongoing exchange rate volatility following the unification of the naira.
In an effort to attract foreign currency through foreign portfolio investments or other forms of capital importation, government officials have been engaging in a series of meetings with foreign investors.
Contrary to expectations of increased supply following the unification, the exchange rate between the naira and the dollar is still facing demand pressure due to limited supply. Initial beliefs that most of the supply was in the black market due to exchange rate disparities have been challenged by the current situation.
The lack of adequate supply has become a cause for concern, as Nigerians are growing impatient with the combined impact of exchange rate depreciation and the removal of fuel subsidies.
A reliable source, who spoke to Nairametrics on the condition of anonymity, revealed that some government officials accompanied the president to France and explored the possibility of attracting foreign investment.
While discussions are still ongoing to encourage capital importation, foreign investors are expressing hesitation due to the relatively low-interest rates compared to the high inflation rate, currently at 22.79%. The government is actively engaging with investors from the US, UK, and Saudi Arabia to promote foreign investments.
On Friday, the Vice President of the US, Kamala Harris tweeted that she spoke with President Tinubu over several issues including digital inclusion and economic growth.
- “Today, I spoke with President Tinubu of Nigeria about the strong ties between the Nigerian and American people and our shared work on global and regional issues—from defending democracy in West Africa and the Sahel to promoting digital inclusion and economic growth.”
The acting CBN Governor, Fola Shonubi, acknowledged on Tuesday that supply-demand imbalances were driving the current volatility in Nigeria’s exchange rates. Speaking after the Monetary Policy Committee meeting, Shonubi recognized the prevailing volatility, attributing it to pent-up demand that surpasses the existing supply.
Shonubi, however, remains optimistic that as demand is met, a more stable and orderly market will emerge.
Data from the National Bureau of Statistics for the first quarter shows that Nigeria attracted a total of $1.1 billion in capital importation, compared to $1.5 billion in the same period last year. Foreign portfolio inflows also decreased from $957 million last year to $649 million in the first quarter of this year.
Nairametrics anticipates that capital importation in the second and third quarters will surpass the Q1 performance as the exchange rate unification continues to improve.
What they are saying
The chief executive of the Center for the Promotion of Private Enterprise, Dr. Muda Yusuf, said the government needs to restore normalcy to oil production.
He said this is a quick win for boosting foreign exchange earnings.
- “With crude oil price at over 80 dollars per parallel, fixing production would surely make a huge difference.
- “We need to preserve confidence in the foreign exchange market as much as we can. The worst thing that can happen to a financial market system is a collapse of confidence.
- The CBN should manage the market in a way to reduce volatility in the official window. Parallel market rate is important, but should not be a priority at this time. Stability is the official window within a band that the CBN can support is paramount.” he said
He also added that critical reforms needed for macroeconomic stability are already underway. but highlighted that managing the transitional phase of these reforms requires a strategic approach.
The National Coordinator, the Independent Shareholders Association of Nigeria (ISAN), Moses Igbrude, noted that Nigeria does not produce foreign exchange; Nigeria must earn it.
He stated that in order to have forex Nigeria must produce more to earn more. So the lasting solution is to earn forex, which would require exporting more.
He said the best way out is for the government to formulate and implement policies that would encourage more export of Nigerian goods and services.
He said one potent way of encouraging exports is to revive the Export Expansion Grant (EEG) which was inaugurated during the Obasanjo administration.
He said the “Japa syndrome could prove to be advantageous in the future as Nigerians living abroad remit more forex to Nigeria.”
He said Nigeria must do more to exploit crude oil production potential and export more of it. He added that Nigeria should reduce its demand for the dollar since it does much of its foreign trade with China.
Note: This article was updated to include comments from experts
