To sustain the steady appreciation of the naira against the dollar, which hit a record low on Tuesday, reaching a record $1,310/$, the Federal Government has begun moves to bridge the dollar supply gap fuelling the free fall, Sunday PUNCH has learnt.
Our correspondents learnt from top government sources that the government was reaching out to individuals hoarding the dollar, establishments and those found to have looted the treasury to make them “bring their monies to the mainstream market.” It was learnt that the government was willing to do whatever was necessary to solve the problem.
A top source in the Presidency said the initiative formed the crux of two Executive Orders recently signed by President Bola Tinubu.
The orders are part of the Federal Government’s measures to ensure liquidity in the nation’s forex market, stabilise the market and sustain the appreciation of the naira, which had fallen against the dollar in recent weeks.
Although the orders are now in operation, their content and the ramifications of the interventions are unknown as they are yet to be gazetted.
Speaking on the panel session of the 29th Nigeria Economic Summit, held in Abuja last week, Finance Minister and Coordinating Minister of the economy, Mr Wale Edun, said, “Mr President announced that he had taken measures to ease illiquidity in the forex market, which we know is very problematic at this time.
“The market is illiquid; it’s not functioning properly because there is no supply, and there are various reasons for that. The solution that the President has put on the table is that he has signed an executive order that effectively allows, under forbearance, all the cash that is in the domestic economy to legally come into the formal money supply.
“Along with that, there is another executive order that allows domestic issuance of foreign currency instruments so that they will have the incentive to provide that foreign exchange from whatever source.”
This forbearance, Sunday PUNCH, reliably learnt, is to be a sort of amnesty for persons and institutions hoarding the dollar.
The senior government official told our correspondent that details of the Executive Orders were intentionally kept from the public so as not to raise too much dust that would distract the administration from its goal of stabilising the naira.
The official said, “It’s intentional that we didn’t put out the details. We are talking to a large enough number of stakeholders to bring in their dollars to the mainstream market. These people hold billions worth of cash and we are trying to send them a clear message that they can inject money into the economy and still take it out swiftly when they want.
“We need those dollars back in the system. So, we are trying to see how we can regularise them.”
The source also said the government’s approach to those hoarding dollars was in the interest of Nigerians, adding that it would not mind reaching out to those perceived to be destroying the economy.
The source noted, “If truly we have decided to revamp the economy and get Nigerians out of poverty through a practical end, 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.
“It is worth the sacrifice. It will require reaching out to corrupt people. What matters is that things get done. $100bn will be life-changing for the country.”
At the 29th National Economic Summit, President Tinubu allayed the concerns of the business community, assuring them that crucial plans were underway to improve foreign exchange liquidity.
Tinubu said his administration would honour every legitimate contract with respect to the nation’s foreign exchange obligations.
He had declared, “My government is not blind to the challenges which several of you are facing in the financial markets. I can allay these concerns by revealing that we have a good line of sight into the additional foreign exchange liquidity that is required to restore market confidence.”
He assured investors that his government would uphold the sanctity of every legitimate contract in keeping with his commitment to enshrine fairness and the rule of law in Nigeria.
“Specifically, as it relates to the foreign exchange obligations of the government, all forward contracts that the government has entered into will be honoured and a framework has been put in place to ensure that these obligations are met in due course,” he said.
Prior to its latest intervention, the Nigerian National Petroleum Company Limited in August disclosed that it had secured a $3bn crude repayment loan to support the naira and stabilise the foreign exchange market.
It said in a terse statement on its X account, “The NNPC Ltd. and AFREXIM Bank have jointly signed a commitment letter and Termsheet for an emergency $3bn crude oil repayment loan. The signing, which took place today at the bank’s headquarters in Cairo, Egypt, will provide some immediate disbursement that will enable the NNPC Ltd to support the Federal Government in its ongoing fiscal and monetary policy reforms aimed at stabilising the exchange rate market.”
But despite the initiative, the naira had maintained its steady fall in recent times, fuelling a spike in the prices of goods and services.
While the I&E window had been relatively stable at around N770 to 780/$, the parallel market, where most individuals and businesses get their forex from, traded at over N1,000.
On Monday, the naira exchanged at the parallel market for N1,190/$, while it hit a record low on Tuesday when it exchanged for N1,310/$.
On Wednesday, the naira appreciated a little when it exchanged for N1,300 in the parallel market. It maintained the rate on Thursday.
But on Friday, the naira recorded some gains as it appreciated to N1,250/$. On Friday, it sustained the appreciation, exchanging for N1,150/$.
The sudden appreciation of the naira was said to have plunged many speculators into losses. Some analysts had tied the gains made by the naira to the affirmation of Tinubu’s victory by the Supreme Court.
At the NES summit on Monday, the finance minister said Nigeria was expecting a forex inflow of $10bn in a few weeks, adding, “From the supply of foreign exchange through NNPCL, increased production, reduced expenditure from transactions such as forward sales, from our discussions with sovereign wealth funds, that are ready to invest and provide advanced alongside that investment, there is a line of sight of $10bn worth of foreign exchange in the relatively near future, in weeks rather than months.
Gains sustainable – ABCON
Meanwhile, the Association of Bureaux De Change Operators of Nigeria says naira’s return to the path of growth is sustainable because, according to it, the recent devaluation experienced is not realistic.
The President, ABCON, Dr Aminu Gwadabe, in an interview with Sunday PUNCH, said the fall recently experienced was due to loss of confidence in the local currency among other challenges.
He stated, “The rebound of the naira has shown that there is no empirical evidence to back up its recent mindless depreciation. The depreciation is out of speculation, currency substitution and loss of confidence.
“I therefore congratulate the authorities on their abilities to induce confidence in the market. It is also important to note that the naira is just trying to discover its place as it is difficult to control price mechanism by feat in a competitive and liberalised market, but the interplay of demand and supply in the market.
“I personally see the rebound trajectory to be sustained in the market despite the resistance of the speculators that are recording huge losses from the development as both the fiscal and monetary policies have continued to renew hope of huge liquidity injection from the proceeds of NLNG dividends and access to bilateral financial assistance.”
According to figures obtained from Aboki forex on Saturday, the naira was bought and sold for 1,140/$ and 1,150/$; It had earlier traded at 1,310/$ on Tuesday at the parallel market.
External reserve gains
Figures obtained from the Central Bank of Nigeria on movement of foreign reserves showed that the country’s external reserves recorded $76.82m accretion in one week, after it moved up from $33.249bn on October 19, 2023 to $33.326bn as of the end of October 26, 2023.
It had earlier lost $841.75m in three months after it fell from $34.07bn as of July 7, 2023, to $33.23bn as of October 5, 2023.
Gwadabe said the removal of capital control on the 43 banned items which aligned with article 8 of the International Monetary Fund would enable the policy makers to have the listening ears of Brenton woods institution for further engagements.
While this positive impact might be in the short run and to ensure continuity, he said, “There is the need to implement the democratisation and centralisation of the foreign exchange market and leverage on the BDCs moderating and correcting roles of the foreign exchange market.
“The inclusion of the BDCs in the new foreign exchange reforms remains the biggest miracle that will happen to fight speculation, hoarding and currency substitution of our local currency.”
According to him, the BDCs, through their digitisation, could play significant roles in achieving the apex bank demand measures, more especially on transaction monitoring mechanism, genuine utilisation of available and allowable dollar sources for their operations.
Economists react
An economist and Chief Executive Officer, Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, attributed the naira appreciation to the Supreme Court judgment that brought finality to the litigation around the presidential election. He said the judgment removed uncertainty in the economy.
He stated, “Maybe the confidence level among economic players is improving. You know we had the Supreme Court judgment which has put an end to the unrest and all disputes around the elections. That has removed some level of uncertainty from the economy.
“The pronouncement that the President made about efforts to boost the liquidity in the forex market may have also affected the level of confidence and influenced expectations because if people have expectations that liquidity will improve and the naira will appreciate, they would quickly begin to offload the dollars they have at a lower rate.
“The consequence is that this is positive for the economy. If the trend continues, that means it will have a positive influence on inflation and the prices of goods. That is if we can sustain the trend.”
A professor of Economics at the University of Uyo, Akpakpan Edet, said the increased rate had forced some people to adjust their demand for the naira. He noted however that momentary gains were not enough, and that there must be a holistic approach to saving the naira.
He stated, “Everything about exchange rate movement is tied to demand and supply in the foreign exchange market. Again, people are forced by circumstance to adjust because the naira value to the dollar has become so high that some people cannot afford it. The supply of the naira to the foreign exchange market is also beginning to go down, which is why you can have such a slight adjustment. But that is not what we need. We need a much more drastic reduction.
“We need to seize the opportunity to push down the demand for foreign goods. We must reduce the demand for the dollars. We can have the naira appreciate better.”
On his part, an economist and professor of economics at the Olabisi Onabanjo University, Sheriffdeen Tella, said, “If you are talking of appreciation for just one day, it doesn’t matter.
“All currencies will appreciate and depreciate. For instance, over the weekend, there were fewer transactions so the naira would appreciate but by Monday it will depreciate because there would be more transactions. If we could sustain for two to three days, then we would be talking of something significant.”
