- The value of the naira on the parallel market has shown recent stability after a significant decline. Some attribute this to fortuitous events and government actions, while others express skepticism about the sustainability of the naira rally.
- Dr. Ayo Teriba, CEO of Economic Associates (EA), links the naira’s strength to the Supreme Court’s judgment in favour of President Bola Tinubu, lifting political uncertainty.
- He also highlights positive announcements by the Central Bank of Nigeria (CBN), including the lifting of the ban on 43 items, as contributing factors.
Following a steep plunge in the value of the naira on the parallel market over the past four months, there has been a respite over the past several days.
While some economists ascribe the lull to a turning point due to fortuity and government actions, others posit that the fundamentals are not yet right for a sustained naira rally.
The chief executive of Economic Associates (EA), Dr. Ayo Teriba, observed that the naira started gaining strength since October 27, the day after the Supreme Court judgment in favour of President Bola Tinubu.
- “I believe that the Supreme Court lifted the cloud of political uncertainty that had built up in the approach to the election and might have thickened by the rejection of the petition of the major political opponents. The petitions against the president might have made some neutral observers to want to withdraw their money from Nigeria. So the Supreme Court’s verdict made them to realize that there is not going to be chaos and anarchy. So anybody who was hesitant to bring his money in can feel confident to do so.
- “That, I think, is the most important thing at work. Another thing is that the $11 billion that Nigeria would have lost in the P&ID case, for which I believe the government had to provide a bank guarantee, might have restrained the CBN from making use of $11 billion of her reserves, which the judgment of the British Court lifted. That might be the source, which the CBN has room to clear out some of its arrears. So, two favourable and positive announcements by the CBN, including the lifting of the ban on the 43 items, have strengthened the naira. It was that judgment that set Nigeria free from an $11 billion burden.
- “Added to that is the fact that the CBN has begun to clear the backlog of forex obligations. We don’t know the extent to which they have cleared it. It would be good if they can clear it fully. Will it be sustained? It remains to be seen,” he said.
Referring to the naira rally on the parallel market, Isa AbdulMumin, the CBN’s director of corporate communications, noted that the move to unban 43 items from accessing forex on the I&E window will reduce pressure on the naira in the parallel market. Importers of those 43 items had to access US dollars by themselves.
However, the chief executive of Anthill Concepts Ltd, Dr. Emeka Okengwu, while welcoming the naira rally development, noted that as long as the country is not producing goods and services in tandem with the supply of money, the naira will continue to slide against other currencies.
Dr. Gbenga Omotoso, an economist and social affairs analyst, on his part, told Nairametrics that the Tinubu government must imbibe fiscal discipline in order to save the naira.
He said borrowing money to defend the naira was a bad policy of the previous administration that contributed to plunging the local currency into the sorry value it is today.
The chief executive of the Center for the Promotion of Private Enterprise, Dr. Muda Yusuf, cited that “The fiscal authorities should continually monitor the economic landscape to shape the character of fiscal policy measures to regulate imports in line with comparative advantage principles. We need to worry about the risk of import surge.
There is also a need to upscale the use of fiscal policy measures to boost domestic production and productivity.
However, projecting a positive outlook, Dr. Teriba stated that Nigeria will have to deal with more specific economic concerns. He said the Central Bank and the Federal Government need to do more in terms of trying to attract foreign investments into Nigeria.” Looking for exports is not a short-term thing but looking for investments can be a short-term thing.
“Going by the speed at which the Indians pledged more than $14 billion, how are we doing with actualizing that? We need to look for who else will be in a position to make a commitment to us, and what assets are we putting down to attract foreign investments. This is beyond the Central Bank; it’s a countrywide sovereign consideration,” he stated.
He cited that we see what the Saudis are putting down to attract investors; we see what the Indians have listed on their India investment grid to attract investors.
We see what Brazil has listed on their partnership for private investments. These are online platforms that they listed as projects they want to fund. And investors are engaging and funding them.
- “So, what assets is Nigeria willing to put down; for example, what corporate assets? Aramco is in the news listing shares. The government is willing to sell $50 billion of Aramco’s shares in Saudi Arabia; Aramco is paying $29 billion in dividends. So, which corporate asset is Nigeria willing to push to the market so that we could be seen as wanting to put $5 billion in this company or that company, not that we want to borrow against output. We could also raise money if we list those companies in the stock market.
- “Which real estate project are you willing to free? The National Stadium is there, idle. Investors can come in and put money in there and generate income. The day their money arrives it’s liquidity for us. When they start generating income, it’s income for us as we will get a share. The Federal Secretariat is idle. Is the government willing to let investors come and rebuild it into modern offices that the private sector will hire and pay the federal government?
- “And what infrastructural assets do we wish to offer investors to put money in? So there are corporate assets that the government can take to the market and begin to securitize them as assets, real estate can be securitized as assets; infrastructure can also be securitized. We build roads and airports all over the place. We also have train stations. Which investors could we engage?
- “Many other countries make about half the money they generate from non-transport activities at airports and train stations. We make no such money. Investors should be willing to come and capture the indirect benefits of road transport at rail stations, airports, seaports, etc. Basically, those are the kinds of questions Nigeria needs to confront,” he stated.
Nice one. I believe this would have been easier to read with simpler grammar.
Thank you.