Amidst the political turmoil in Niger Republic, the Nigerian naira has faced a steep decline in the foreign exchange markets, hitting an alarming record of N955 to US$1 last Thursday. This unprecedented fall has triggered panic among businesses and raised concerns among the public. President Bola Tinubu and the Central Bank of Nigeria are at a crucial juncture, needing swift and innovative strategies to regain control over the currency and stabilize the economy.
Despite efforts to merge exchange rates by Tinubu and the CBN, the naira’s downward trajectory has accelerated, failing to achieve the intended goals of a realistic rate and closing the arbitrage gap between official and informal market rates. With an official rate of N767.76/$, the gap has widened, giving rise to illegal arbitrage. The absence of an effective economic management team, coupled with inflation and business contraction, threatens to push the naira past the N1,000/$ mark, potentially spiraling into dire consequences. Adding to the anxiety, the IMF has criticized existing fiscal and monetary policies, casting doubt on the naira’s stability.
Wale Edun, Tinubu’s economic adviser, advocates for a more realistic rate of N700/$, emphasizing that higher rates lack fundamental economic support. The Economist Intelligence Unit’s optimistic forecast of N1,000/$ by 2027 seems questionable in light of current events. Supply constraints from low non-oil export earnings and artificial demand fueled by speculators and hoarders exacerbate the situation. Rampant money laundering by various actors further destabilizes the market, diverting focus from genuine producers and enterprises.
Tinubu is urged to shift from fragmented decisions to cohesive, strategic economic policies. The need for a skilled Economic Management Team and more economists and technocrats becomes evident, surpassing the current politically-oriented cabinet nominees. To prevent a loss of naira control and hyperinflation, the CBN should temporarily fund the forex market, clamp down on banks engaging in illegal arbitrage, and collaborate closely with regulatory and law enforcement agencies for strict monitoring and punitive measures.
Amid an economy grappling with unemployment, inflation, production decline, and dwindling revenues, targeted stimulus measures are imperative for recovery. Sectors like agriculture, pharmaceuticals, transportation, and small businesses require safeguarding. Attention to SMEs, power supply subsidies, low-interest credit access, and reduced taxes are vital. Although challenging decisions lie ahead, a well-informed approach is necessary. Short-term bolstering of the market to stabilize the naira and support legitimate businesses is a priority. Rigorous planning is the cornerstone to avert an economic collapse, necessitating a shift in Tinubu’s decision-making approach.