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Nigeria to review dollar, other currency use

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By Abiodun Okunloye

Action will be taken to mitigate the effects of the naira's depreciation.

The Committee on Banking Regulations has been tasked by the House of Representatives to look into the usage of the US dollar along with other foreign currencies as acceptable money in Nigeria. At the same time, it urged the Central Bank of Nigeria (CBN) to take action to mitigate the effects of the naira’s depreciation against the dollar and other major currencies. The House called on the CBN to relieve the nation’s reliance on the dollar and other currencies by enacting measures to stabilise the currency, curb speculative activities in the foreign exchange market, and raise the naira withdrawal limit.

In addition, it is strongly recommended that the federal government come up with some anti-corruption measures and structural reforms that will help the nation’s economy become more diversified. Also, the House asked the government to increase exports and decrease imports by boosting the confidence of foreign investors in the government’s fiscal and monetary policies. It entrusted the Committees on Banking Regulations and National Security and Intelligence with the responsibility of interacting with the CBN in order to initiate compliance measures and made it a requirement that they do so.

Economy has been severely impacted by the worrisome exchange rate.

These resolutions were passed after a motion brought forward by the Honorable Ismaila Haruna Dabo was adopted. The modifications that were introduced to the country’s foreign exchange market in June 2023 were acknowledged by the House. President Bola Ahmad Tinubu of Nigeria declared these adjustments through the Central Bank of Nigeria. According to what was reported, this change was made so that exchange rates for foreign currencies may now be established by the market rather than by the CBN.

Despite the President’s aim to let market forces set the value of the naira, the country’s economy has been severely impacted by the worrisome exchange rate, which has led to a lack of funds despite a surge in demand. The House estimated that almost 90 percent of Nigeria total export returns come from oil, which is the foundation of the country’s economy. In spite of this, fluctuations in the price of oil throughout the world have a significant impact on the foreign exchange market in the country. The House concluded that this was the reason for the ongoing depreciation of the naira.

Naira has lost over 20% of its value since September 2023.

According to the House, foreign exchange inflows are minimal despite the nation’s June unification since high demand for foreign currency and inadequate access to official markets encourage black market purchases. From September 2023’s N778.602/$ to roughly N1000/$ on the parallel market, the House argues the naira has lost over 20% of its worth. This marks the first time Nigeria has liberalised its forex market. The House is concerned about inflation and rising costs of living, as the motion explains, and a weaker naira raises prices for imported commodities.

Most vulnerable members of society bear the brunt of this rising cost of living since they are the ones who have the most difficulty covering the increasing cost of everyday items. As the naira continues to fall in value and decrease in value against the dollar along with other foreign currencies, the House is concerned that foreign investors may be discouraged from investing in Nigeria out of fear of currency losses. This has the potential to slow economic growth and prevent the creation of new employment opportunities for unemployed youth.

Involved parties must collaborate to revive the economy.

They are also mindful that a weaker and devaluing Naira may increase the country’s external debt servicing costs, which may lead to less money being allocated to vital areas like healthcare and education. They acknowledge that the Central Bank of Nigeria (CBN) routinely uses its foreign reserves to stabilise the naira, but doing so can drain the reserves and leave the economy vulnerable to shocks. To solve Nigerian economic problems, the House recognises that all parties involved, including Parliament as the people’s representative, must collaborate.

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