The Federal Government of Nigeria may inject some foreign currency into the economy to support the value of the naira while market forces stabilise.
This was said on Wednesday in a press conference with reporters in Paris by Mr Dele Alake, Special Adviser to the President on Special Duties, Communication, and Strategy.
In order to promote foreign direct investment into Nigeria, Alake is a member of President Bola Ahmed Tinubu’s delegation to the new global financial accord meeting in Paris, France.
Alake’s remark follows the recent unification of currency rates, which caused the Naira to significantly appreciate versus the US dollar on the black market.
On June 21, 2023, the naira traded at an average exchange rate of N758 to $1, a notable improvement of 2.82% from the trading session the day before when the dollar was pegged at N780 to $1.
This is due to the fact that one week after the announcement of the unification of the currency rate, a total of $788 million has so far been registered as cumulative turnover in the official Investor & Exporter Window.
Don’t forget that Mr President has taken some very bold steps in the area of economy, in the area of social engineering in the last few weeks, particularly with reference to the unification of the multiple exchange rates, which has caused a very positive multiplier effect, the presidential spokesman said, without going into detail about the nature of the dollar injection.
“However, in the short term, we have noticed and expected that there will be a slight spike in the demand and then that would affect the value of the naira viz-viz the dollar. So, apart from the immediate, short and long-term positive effects of that unification policy, there could be a need for an injection of direct foreign exchange into the economy to shore up the value of the naira while market forces stabilise. And in the short run or medium term, there is going to be when the effects of this policy begin to mature.”
He claimed that the president’s actions during the previous three weeks had stoked investor and foreign nation interest in Nigerian affairs and helped the nation’s economy.
The special adviser added that heads of state and representatives of international financial organisations have expressed a desire to meet with the president to discuss potential areas of cooperation with the recent encouraging growth in Nigeria.
Alake expressed hope that many foreign investors would return once new economic measures were implemented because they had left Nigeria due to the country’s restrictive currency regulations. This was because the country needed substantial and all-encompassing direct foreign investment.
The Naira’s performance
The naira to dollar exchange rate has varied since its inception a week ago, falling 29% to N664/$1 on the first day.
It decreased further to N702/$1 before the week’s conclusion, when it was slightly stronger at N664/$1.
On Monday at N770.3/$1, the I&E Window closed. On Tuesday, June 20, it reopened at N756.6, continuing the instability that had been experienced ever since the unification process started.
The official exchange rate of currencies matched the black market rate for the first time since around N363/$1 in 2018.
On Monday, June 19, 2023, N790/$1 was announced as the highest day rate transacted in the I&E Window.
Although the FMDQ publishes the daily turnover of foreign exchange exchanged, this figure does not entirely reflect the total amount of foreign exchange actually bought and sold. However, it offers a surrogate for the I&E Window’s level of liquidity.
