Naira Depreciation: Expert Demands Reforms, Framework to Tackle FX Abuse

Naira Depreciation: Expert Demands Reforms, Framework to Tackle FX Abuse

  • A financial expert has asked the Nigerian government to take FX reforms seriously
  • Samuel Showunmi, a Capital Market Executive, stated that the Nigerian government needs to put down rules for the FX market
  • He said the moment rules come into play, operators would sit up, and FX abuses on the system would end

Pascal Oparada has over a decade of experience covering Tech, Energy, Stocks, Investments, and Economy.

Over the weekend, a financial expert called on the Nigerian government to formulate new reforms and regulatory framework for Nigeria's foreign exchange market.

Speaking on a radio programme monitored by our reporter, Samuel Showunmi, a Capital Market Executive at Iron Global Markets Limited, a subsidiary of Iron Capital, an Africa-focused investment banking franchise based in Africa, said operators were taking rules into their own hands because of the absence of FX regulatory guidelines.

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Naira, FX Reforms, CBN
A financial expert asks Nigeria to boost forex regulations Credit: Bloomberg/Contributor
Source: Getty Images

Lack of regulations responsible for the naira's fall

According to him, when laws come in, people would understand the dos and don'ts regarding their activities in the foreign exchange market.

"There are no simple or quick fix measures. The measures must be a consolidation of different strategies and policies. The government must quickly come out with an FX reform policy, and I know that the Central Bank of Nigeria (CBN) is working on a new regulatory framework for the FX market, but I want to advise that we don't delay too much because delay can be dangerous.
"I think CBN is brilliant because, in the last few weeks, it has said it's moved some of its critical departments to Lagos. It's a strategic move, and market operators should be aware of this because it's a move that tilts towards CBN trying to move closer to the market, and that tells us that the reforms and guidelines will soon come out. When the guidelines are out, CBN is closer to the market, and surveillance monitoring will follow suit, then enforcement.

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"That is smart, but I will advise not to delay the regulatory framework. It should come out on time, especially now that they have moved base to the theatre of operations and are trying to set things in place, which is very good. This means CBN is prepared, and they know what to do, and that will address some of the issues we are currently experiencing in the short term," Showunmi stated

Showunmi explained that the government should increase the tax base in the long term by capturing so many Nigerians in the tax net.

Patronising made-in-Nigeria products boosts local currency

He stated further that Nigerians must continue patronizing locally made goods, saying massive disparity between the naira and the dollar fuels poverty and widens the inequality gaps.

"In the long run, we must concentrate on those activities that will sustain the supply side. As I said, keep the oil production level up, and if we can not meet the quota, let's maintain the current level; we shouldn't go down on the current level. Policies that will attract foreign investors to operate in our market, though, President Bola Tinubu is championing the course by traveling and addressing investors; these are the moves we need.

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He also called for political will from the President to deal decisively with violators of FX guidelines and framework.

"There will be a decline in the standard of living, and no one in government can stand it because when you push the poor so much, and they turn back, you can expect the unexpected."

Naira expected to recover as CBN releases $500 million for FX liability backlog

Earlier, reported that the Central Bank of Nigeria (CBN) had disbursed another tranche of $500 million across sectors to follow up on its recent payment of about $2 billion to clear outstanding commitments in manufacturing, aviation, and petroleum sectors.

According to CBN’s acting director of Corporate Communications, Hakama Ali, the move aligned with the apex bank’s commitment to addressing the backlog of authenticated foreign exchange transactions.

Ali assured that CBN’s management remained dedicated to settling the transactions swiftly.


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Pascal Oparada (Business editor) Pascal Oparada is a Mass Communications Graduate from Yaba College of Technology with over 10 years of experience in journalism. He has worked in reputable media organizations such as Daily Independent, TheNiche newspaper, and the Nigerian Xpress. He is a 2018 PwC Media Excellence Award winner.

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