On Tuesday, the Presidency stated that the efforts of the Yemi Cardoso-led Central Bank of Nigeria to stabilize the naira are in line with President Bola Tinubu’s approach to removing harmful actors from the foreign exchange market.
The Presidency also pledged to keep fighting against illegal money dealers, and encouraged Nigerians to expect a stronger naira and reduced prices of essential goods by the first quarter of 2025.
Ajuri Ngelale, the Special Adviser to the President on Media and Publicity, spoke about this, emphasizing the recent measures taken by the central bank to stop the naira's decline and bring it back to its fair value.
The CBN has issued various circulars and directives that have helped the local currency to recover from 1,900/dollar in late February to nearly 1,200/dollar on Tuesday in the parallel market.
The naira, which had dropped to over 1,500/dollar in the official market, also increased to about 1,230/dollar on Monday.
As per analysts, the recent policies of the CBN have significantly contributed to the strengthening of the naira against the dollar.
Major reforms include the unification of exchange rate windows, liberalization of the FX market, clearing of FX backlog obligations for banks and airlines, implementation of a Price Verification System, imposition of limits on banks’ Net Open Position, removal of the daily cap of N2bn on remunerable Standing Deposit Facility, and overhaul of the Bureau De Change segment.
Several reforms in the FX market have negatively impacted illegal money dealers and currency speculators in the FX market and banking sector.
Nonetheless, on Tuesday, the Presidency vowed to maintain the progress, stating that regulatory agencies would pursue illegal money dealers and harmful actors working against the government's efforts.
In addition to stabilizing the exchange rate, the President also promised to address inflation and reduce it significantly.
Ajuri Ngelale, the Special Adviser to the President on Media and Publicity, informed The PUNCH that President Tinubu “has consistently believed that the hardships endured and sacrifices made by the people over the past 10 months will be rewarded across the board.”
Therefore, he stated, “The President’s approach to removing harmful actors and sharp practices from the foreign exchange market has created a foundation for the sustainable strengthening of our national currency against all global currencies, which is what we are now witnessing.”
“But there is still much work to be done, and this is not a time for celebration. It is a time to double down and work harder to ensure that inflation is significantly reduced soon, and that regulatory agencies protecting consumers intensify enforcement to prevent businesses from exploiting people by not reflecting the prevailing exchange rates in their prices for goods and services,” he added.
The President's office also said they believe that when private and government-owned crude oil refineries start operating again, it will bring in more money for the country and improve the economy.
When Tinubu started his term 10 months ago, he stopped giving subsidies on petrol, saying it would save the government money for infrastructure expansion.
The Presidency assures Nigerians
He also brought together the foreign exchange rates to stop currency arbitrage, among other things.
However, these actions caused instability in the value of the naira and made life hard for Nigerians as food prices went up.
On the day he took office, the President's announcement of 'subsidy is gone!' caused a sudden shortage of petrol and the prices at the pump tripled within hours.
In a statement released on May 31 and signed by the then Chief Corporate Communications Officer, Garba Deen Muhammad, the Nigerian National Petroleum Company Limited explained that the adjusted pump price matches 'current market realities.'
The higher pump price led to higher prices for necessary goods and services, making the cost of living reach an all-time high.
As a result, the government and the Labour Union have been in conflict for months because the Labour Union said the government is not doing enough to ease the people's suffering. The union also argued that the N30,000 minimum wage is no longer enough with the higher cost of living.
After occasional strikes and calls for nationwide protests by the Nigeria Labour Congress and the Trade Union Congress of Nigeria, the Federal Government, on January 30, put together a 37-member committee to suggest a new national minimum wage for the country.
Additionally, the living cost problem became worse when the naira was allowed to float in the Investors & Exporters FX window. In February 2024, the local currency hit an all-time low in value, exchanging for N1,900/$. It was exchanged for about N800/$ at the start of the administration.
However, the naira has recently started to gain steadily against the US dollar, exchanging N1,200/$.
Furthermore, the CBN, wanting to fix issues in the retail segment of Nigeria’s foreign exchange market and narrow the gap in the exchange rate, began selling FX to BDC operators at lower rates.
In March, the central bank sold $10,000 to BDCs at a rate of N1,251/$ and directed the BDCs to sell to eligible customers at a rate not exceeding 1.5 per cent above the purchase price (N1,269/$1).
In April, it sold $10,000 to each BDCs at N1101/$ and directed the operators to sell at a spread not more than 1.5 per cent above the CBN rate.
The CBN also directed all eligible BDCs to start depositing naira into the designated CBN accounts from April 8, 2024.
The CBN also put effort into investigating organizations they believe are undermining the economic reforms of the Tinubu administration.
In late March, Cardoso revealed that security agencies including the Economic and Financial Crimes Commission were investigating questionable foreign exchange allocations and forward contracts previously estimated at $2.4bn.
The new CBN leadership hired a global firm, Deloitte, to conduct an audit of the $7 billion debts. Cardoso had previously stated that around $2.4 billion of FX allocations from the $7 billion backlogs were not valid.
The situation arose when two Binance executives were detained and under investigation for tax evasion and other crimes.
On April 8, 2024, the CBN instructed all banks in Nigeria to cease using foreign currencies as collateral for naira loans within 90 days. This was explained in a circular titled “The use of foreign-currency-denominated collaterals for naira loans” with reference number BSD/DIR/PUB/LAB/017/004.
The regulator noted that bank customers were using FCY as collateral for naira loans and has therefore prohibited it immediately.
As a result, banks were instructed to reduce all existing loans with foreign currency collaterals to 90 days or face a 150 percent capital adequacy ratio computation as part of the bank’s risk.
However, the Presidency stated that despite these efforts and initial progress, it is not yet Uhuru until these benefits are reflected in lower prices of essential goods and services for the average Nigerian.
The Presidency instructed consumer protection agencies to ensure that local prices align with the increasing value of the naira.
“But there is still much work to be done and this is not a time for celebration. It is a time for doubling down and working harder to ensure that inflation is sustainably brought down quickly.
“As our private and publicly-owned refineries resume operations between now and the first quarter of 2025, the nation’s cash position will dramatically improve to the extent that Nigerians can rightly expect a stronger Naira and a fair reflection of its strength in the prices of commodities in the marketplace,” said Ngelale.
The Presidency also assured Nigerians of the better days ahead, stating that the benefits of the reforms will become “more evident” as the administration progresses.
“Once you join the rising spending power of Africa’s largest population with the historic availability of trillions of naira for consumer credit that will bolster the real sector, you will see why Nigerians will be most pleased that they elected a financial engineer and businessman as president by the end of his first term in office, even as the signs are increasingly more evident today,” the Presidential spokesman concluded.
Naira reaches N1,200
Meanwhile, the naira strengthened to N1,200 per dollar in the parallel section of the foreign exchange market on Tuesday, according to Bureau De Change operators.
This figure represents an increase of N40 from the N1,240 per dollar reported on April 3.
Licensed and unlicensed Bureau De Change operators at the popular Wuse Zone 4, quoted the buying rate of the local currency at between N1,100 and 1,150 while selling at between N1,150 and 1200.
A currency trader, Malam Yahu, stated, “The dollar was quoted at N1,200 on Tuesday and we sold at that price because of the public holiday but we are buying at N1,100 and selling at N1,200 and I am sure that by next tomorrow, the price will drop further. Demand has really gone down and our traders have travelled, so you won’t find traders at the market now. “
The new rate resulted from the Central Bank of Nigeria's decision to change the exchange rate for Bureau De Charge Operators to N1,101 per dollar from N1,251/$1. The bank plans to sell $15.88 million to 1,588 eligible BDCs.
In a letter to the President of the Association of Bureau De Change Operators of Nigeria, the CBN announced the sale of $10,000 to the BDC operators at an exchange rate of N1,101 per US dollar.
In March, the apex bank sold $10,000 to BDCs at a rate of N1,251/$ and instructed the BDCs to sell to eligible customers at a rate not exceeding 1.5% above the purchase price (N1,269/$1).
This was the result of the bank's earlier decision to sell foreign exchange worth $20,000 to eligible BDCs across the country in February.
The statement said, "We write to inform you of the sale of $10,000 by the CBN to BDCs at the rate of 1101/$. The BDCs are, in turn, to sell to eligible end users at a spread not more than 1.5% of the purchase price."
This recent move comes after an appeal by the Association of Bureau De Change Operators of Nigeria to the CBN to lower its applicable exchange rate below the N1,251/$ it set for its members.
Meanwhile, the Lagos Chamber of Commerce and Industry and the Small and Medium Enterprises and Development Agency of Nigeria have supported the CBN's directive for Deposit Money Banks to stop using foreign currencies as collateral for naira loans, stating that the move will help increase the supply of foreign exchange in the economy.
The LCCI and SMEDAN revealed this in separate conversations with The PUNCH in Lagos on Tuesday.
The President of LCCI, Mr. Gabriel Idahosa, said using foreign currencies as collateral for naira loans is one of the reasons the economy has been losing foreign exchange liquidity.
“That was one of the ways the economy was losing liquidity in foreign exchange. So when people have foreign currency rather than put in the economy and use it for import; they put it in an account unutilised and use it for collateral for naira transactions which again is one of those things that have become prevalent in Nigeria and helping to lower the value of the naira.” Idahosa said.
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He explained that to take a naira loan facility you should either make a naira deposit or assets that are available to the bank.
He said, "They are two different currencies because normally if you want to take a naira loan facility you should either make a naira deposit or assets that are available to the bank. So certainly the CBN is doing this as part of increasing the supply of foreign exchange into the economy."
He added, "So the foreign currency is not doing anything, it is not helping the economy so that was why the CBN is doing that. So it is a welcome development because we have always said that the CBN should look at how to supply more foreign currency into the economy."
The LCCI president suggested that if anyone in possession of dollars doesn’t need them for anything it should be sold off.
“If you have dollars and you don’t need them, you sell them or you keep them in a sales account but you don’t now turn around to take a naira loan to do transactions.”
Mr. Moshood Lawal, who is in charge of Corporate Affairs at the Small and Medium Enterprises Development Agency, mentioned that they are very happy about this development because it makes it easier for small businesses to get loans without facing too many problems
He said that they think businesses can't succeed in a volatile and uncertain economy, which is made worse by the need for foreign currency collateral in Nigeria. So they are glad about this decision within the MSME ecosystem.
