N1,120/$: Finance Minister Wale Edun Explains Why There is Forex Shortage in Nigeria

N1,120/$: Finance Minister Wale Edun Explains Why There is Forex Shortage in Nigeria

  • Nigeria's minister of Finance has highlighted the reason Nigeria is experiencing forex shortage
  • Mr Wale Edun links the country's forex shortage to the imbalance in its imports and exports
  • He, therefore, advocates economic diversification as the only way to solve the forex challenges

Legit.ng journalist Victor Enengedi has over a decade's experience covering Energy, MSMEs, Technology and the stock market.

The Federal Government has said that the country doesn't have enough foreign exchange because it doesn't earn much from its exports to other countries.

The Finance Minister, Wale Edun, stated this at a conference in Abuja where he stressed the importance for Nigeria to make money from other sources instead of depending primarily on crude oil.

Wale Edun, forex shortage
The minister emphasised that the current government is prepared to ensure the economy stays stable. Photo credit - TVC News, BBC
Source: UGC

Information from FMDQ Securities, the official trading platform for the naira, indicates that on Thursday, November 16, 2023, the naira concluded trading at N841.14/$1.

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This represents a decrease of N22.15 or a 2.71% loss against the dollar compared to the exchange rate of N818.99/$1 from the previous day.

On the other hand, the naira closed at N1,120 to a dollar at the parallel market, popularly called the black market, on Friday, November 17.

FG connects forex shortage to low export earnings

Even though the economy has started to diversify, Edun is concerned that the foreign exchange revenue from other countries is not increasing much because the country still depends a lot on selling oil to make money.

Edun said:

An important part of that is diversification. The economy is diversified as other sectors are increasingly contributing to the economy. But what is not diversified is our source of foreign exchange revenue.
So, from all those sectors, whether telecommunications, transport, or manufacturing, there are not enough foreign exchange earnings or enough savings to give us what we need, which is the positive balance of trade.

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According to BusinessDay, the minister said the country should earn more from exporting goods than it spends on importing them to create foreign money for stabilising the currency.

It would be recalled that in September 2023, when the naira fell to a record low, the minister, while speaking in an interview in New York, the US, had blamed it on $6.8 billion overdue forward payments on the forex market.

FG to look for investment inwards

Edun explained that foreign investors are not interested in increasing foreign direct investment because of rising inflation in Western countries.

He mentioned that because investors are so interested, the government might need to find solutions and investments from companies instead.

He, however, emphasised that the current government is prepared to ensure the economy stays stable.

He said the goal is to shape our economy, institutions, and corporate governance in a way that draws in people from all over the world and that those interested and with extra savings should find it appealing to invest in profitable ventures.

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Increase focus on non-oil exports

In response to the minister's remarks, Jamiu Mustapha, Deputy Managing Director of Oscars Textile Company, emphasized the imperative of directing attention towards the export of non-oil items.

Mustapha told Legit.ng that this strategic focus is crucial for bolstering foreign exchange reserves in the country.

He said:

The Minister's remarks re-echo sentiments that many of us have been expressing for years.
The minister's statements align closely with the longstanding observation that our nation excessively relies on imports, creating an imbalance in trade.
Notably, a considerable portion of our foreign exchange is dedicated to importing items that could easily be manufactured domestically.
To address this issue, there is an urgent need to shift away from an overdependence on oil exports and redirect our efforts toward significantly enhancing non-oil exports.
Only through such a strategic realignment can we hope to alleviate the persistent shortage of foreign exchange in the country.

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CBN to intervene, pump more dollars into the market

In related news, Legit.ng reported that the Central Bank of Nigeria (CBN) has finalised plans to halt the continuous decline of the naira against the dollar by injecting more dollars into the market.

This development follows a previous report by Legit.ng, stating the CBN's commitment to stabilising the naira's value against the dollar.

After updating President Bola Tinubu at the State House, the CBN shared this information with reporters about the bank's initiatives to prevent the currency from depreciating further.

Source: Legit.ng

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