The Federal Government says it is putting in place measures to achieve exchange rate target of N500-N600/$1, while reorganising the banking sector, leading to various private sector institutions and financial experts to expressed divergent views over the feasibility vis-à-vis the benefits of such goals. Experts have advised government on what it should do to achieve a stable macroeconomic environment that will address exchange rate instability instead of speculation of exchange rate.
Dr Tope Fasua, Special Adviser to the President Tinubu on Economic Matters was speaking at the “Cowries to Cash” lecture and launch in Abuja yesterday, dropped the hint on how Federal Government is planning to achieve the value of the naira.
Bearing in the mind on how the naira gains some value within the week, Fasua said the trend is expected to continue as a result of policies being implemented by the government.
Fasua cautioned Nigerians who are in the habit of hoarding foreign currencies with the hope that the local currency will continue to fall, warning that they will be disappointed.
During the lecture, Fasua who was representing Vice President Kashim Shettima, said: “For those who are speculating and praying and wishing that the local currency would become nonsense, I believe that policies being rolled out by the Central Bank and the Federal Government that I serve, led by the President Bola Tinubu, will shock some of them.
“You know, he has some very great ideas coming up. Some of them are what you’ve seen reversing the fall in the value of the naira, but he has also challenged us to review forward many of the targets, for example, the idea that Nigeria’s economy will get to a trillion dollars. He wants to achieve it by 2026.
“Some people thought the naira will continue to lose value. Of course, we can already see what’s going on and the naira will strengthen even further to may be N500 or N600. I’m beginning to see some of those.”
Reacting to this hint, the Nigeria Employers Consultative Association, NECA, and some economy experts commended the idea but insisted that the policy plans be disclosed and made clear to public.
disclosed and made clear to public.
The group added that government should focus on local production instead, address the nation’s propensity to import, make the fiscal and monetary policy authorities work in sync among other things, before dreaming of a lower exchange rate
The Director-General of NECA, Mr Adewale-Smatt oyerinde, while commenting said, government should deepen engagement with organised business with aim of building greater consensus while urging them to support reforms.
Oyerinde explained: “We note the plan by the Government to shore up the value of the Naira to between N500 and N600 to a Dollar in 2024. This plan is quite commendable and ambitious.
“While we commend the plan, it is instructive to note that this will require deliberate and focused plan of action to address the shortfall in Dollar supply”.
How they intend to do it is still unclear —Amolegbe
The immediate past President of Chartered Institute of Stockbrokers, CIS, Olatunde Amolegbe, said though he is yet to see any working document on how such exchange rate goal will be achieved, but wondered how they would achieve it. He stated: “Though I have not seen where they stated this, how they intend to do it is still unclear to me. We certainly do not have enough information that points to how this will happen in the medium term”.
Also reacting was the Co-Founder, Comercio Partners Limited, said: Nnamdi Nwizu, “ It is good to see the fiscal and monetary policy authorities working in sync. We have not seen that in a while.
“However, we need them to shed more light on actions being taken and how they intend to use them to strengthen the economy and ensure we have more exports to help the currency.
“I am not sure that a reorganisation of the banking sector alone can bring about the stability we seek. We need to see a lot on the fiscal side for that to happen.
“I also do not think government should be giving exchange rates targets.”
Fall in Inflation is Eminent Kurfi
The Managing Director/CEO, APT Securities & Funds, Mallam Garba Kurfi, described the proposition as a welcome development, saying it will lead to a fall in inflation rate in the long run.
Kurfi noted, “It is a good development and we will wait to see the plan. If the apex bank decided to do that it is good since they are the most realisable sources of FX. In this context, they are referring to restructuring the banking system for a desired result”.
He further said: “It is a welcome development and if they can achieve that, our inflation will come down because it is cost-push inflation.
“With that, achieving $1 trillion Gross Domestic Product, GDP, as the President promised, will be possible. We will wait to see the monetary and fiscal policies that will make that achievable.”
Also contributing was Ambrose Omordion, an analyst at Invesdata Consulting Limited, who was optimistic that the exchange rate goal was possible, arguing, however, that dollar inflow from the World Bank and other multilateral organisations will help boost the nation’s foreign exchange earnings.
He explained, “It’s possible if government will do the needful. Why I said it’s possible is that because for more than one year, the price of crude oil in the international market has remained above $80 dollars. If we are producing at capacity to meet our OPEC quota, it will increase our forex earnings.
Some recommendations were made by these expert at the end of the debate as they opined that the federal government can achieve the desired result if..
According to NECA, “To achieve this, the government must urgently address the nation’s propensity to import, including the fixing and or privatization of the national refineries, ensure maximum crude production in line with OPEC quota and promote local production. “Without producing what we consume, the nation will continue to conspire to put pressure on the Naira, leading to its continued weak state.
“We urge government, in this line to continue to deepen engagement with organized businesses, with the view of building greater consensus and support for the on-going reforms.”
Also, Amolegbe said: “The continuing mop-up of system liquidity via the resumption in the issuance of treasury instruments at significantly higher rates could slow the flows of money going towards the FX market as well as encourage increased foreign investment inflows.
In his recommendation, Nwizu said: “Instead of focusing on reforms, the Ease of Export or Doing Business, should be considered.”
Recommending, Omordion said: “The World Bank has said it’s giving us an interest-free loan facility of $1.5 billion. African Development Bank has also made similar promises to Nigeria. Not only that, we need to encourage more exports from Nigeria.
“We also need to encourage Nigerians abroad to repatriate funds back to the country in hard currency.
“There is need to check the elites, including the political class, who buy and stock dollars. If politicians are not converting their naira to dollar and storing it in their accounts, we won’t be seeing the dollar scarcity.
‘’So, the EFCC should move in and monitor bank accounts of every Nigerian and know those that are stocking dollars in their domiciliary accounts.
“These are the things we should be doing to increase supply. It’s doable but the government needs to encourage production, rather than depending on importation. When we start producing, it will reduce the pressure on dollar demands.”