Halt Naira Slide, Now

Recently, the Nigerian naira sharply declined to an unprecedented rate of N955 per dollar, causing widespread concern and hysteria in business circles and among many Nigerians. President Bola Tinubu and the Central Bank of Nigeria (CBN) must take innovative and pragmatic measures, swiftly to stave off further damage to the currency and the economy. Acting decisively is paramount to restore stability and confidence.
The economy is troubled with negative signs, worsened by Tinubu’s decision to merge exchange rates. Establishing a more realistic exchange rate and reducing the arbitrage gap has proved challenging. The official exchange rate of N767.76/$ has failed to bridge the gap, leading to an increase from N100/$ to N200/$ and creating space for illegal arbitrage. This raises anxieties about the stability and integrity of the Nigerian currency, necessitating urgent action.
Nevertheless, after a meeting between President Tinubu and Acting CBN Governor, Folashodun Shonubi, to deliberate on the condition of the foreign exchange (FX) market, a momentary respite appears to have emerged for the ailing currency. The naira witnessed a modest upturn, hovering around N880/$. Despite recent improvements, experts voice apprehensions regarding the long-term viability of this progress.
After rising inflation rates and declining business activities, concerns grew over the naira surpassing the exchange rate of N1,000/$ and losing value quickly, which could have profound repercussions for the CBN. The International Monetary Fund (IMF) deepened these troubles with its recent statements highlighting the challenges the naira face following loose fiscal and monetary policies. These events have raised valid considerations about the apex bank’s ability to stabilise the weakening currency.
Tinubu’s economic adviser and current Finance Minister, Wale Edun, emphasises the need for a practical exchange rate of N700/$ for the naira. Edun argues that higher rates lack support from the fundamental aspects of the economy. This contrasts with The Economist Intelligence Unit’s projection of a stable N1,000/$ rate until 2027, which seems overly optimistic. Edun’s perspective raises fears about the potential consequences if timely interventions are not implemented.
As a result of decreased non-oil export revenues, the projection could be accurate as the supply is constrained. The current demand is artificially driven by unregulated money laundering activities, including speculators, hoarders, and both state and non-state actors. It is disturbing that the market relies on ill-gotten naira acquired by politicians, public officials, bandits, kidnappers, and associated contractors, rather than legitimate producers or genuine businesses. The situation is worsened by the lack of strict oversight on deposit banks and money exchange enterprises.
Tinubu needs to transition from inconsistent, poorly devised, and disorganised choices to strategic, well-devised, and comprehensive economic policies. The current state of the economy requires immediate attention and effective decision-making. To achieve this, he must form a strong Economic Management Team consisting of economists and technocrats instead of solely relying on miscellaneous politicians as ministers. This shift will ensure that economic policies are grounded in sound analysis and expertise, resulting in sustainable growth and development.
To stabilise the naira and prevent hyperinflation, the CBN must take specific actions. It should ensure sufficient funding for the forex market to maintain a steady supply of foreign exchange and discourage speculation. Also, the apex bank needs to enforce strict regulations and monitor bureaux de change operators and banks to prevent round-tripping and illegal arbitrage. Lastly, a closer collaboration between the CBN, regulatory agencies, and law enforcement is necessary to monitor and punish any infractions swiftly.
An economy facing high unemployment, inflation, production contraction, and dwindling public revenues needs a strong stimulus package. The focus should be on protecting key sectors like agriculture, pharmaceuticals, transportation, and small businesses. Pay particular attention to small and medium-sized enterprises (SMEs), which drive economic growth and employment. Support SMEs by subsidising power supply, providing access to low-interest credit, and reducing taxes and levies.
As we face economic challenges, tough decisions await us. Before making these decisions, it is critical to carefully diagnose and adequately prepare. The shortage of dollars has led to the control of goods by black-market operators, hindering the goal of reducing the gap between official Importers and Exporters rates and the parallel market rates. Temporarily strengthening the market and protecting the naira is essential. By channelling resources towards legitimate businesses, the Federal Government can halt the national currency’s decline.