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.
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.
