The presidential candidate of the Labour Party for the 2023 elections, Peter Gregory Obi, has criticized the government’s recent crackdown on Bureau de Change (BDC) operators, deeming it as ill-advised. Sharing his thoughts on social media, specifically X (formerly Twitter), Obi stated his disapproval of the government’s actions towards BDC operators and cautioned that such actions could worsen the country’s exchange rate issues instead of resolving them. He emphasized that BDCs do not hold the main responsibility for providing forex, but rather act as middlemen connecting those looking to buy and sell foreign currency. Just like in other countries, BDCs play a vital role in making currency exchange operations run smoothly.
He stressed the necessity of taking a holistic approach to combat the root causes of the Naira’s devaluation. He mentioned that it is imperative for Nigeria to shift its focus from just consumption to a production economy, specifically through export-driven production. Obi expressed disbelief at the idea that BDCs alone are responsible for the Naira’s decline, calling it a misguided view of economic logic. He also said it is crucial to address Corruption plaguing the country, which he pinpointed as a major contributor to the high demand for foreign currency.
Fixing structural weaknesses was recommended.
According to him, Naira will continue to depreciate as long as our Economy remains unproductive, corruption deepens and individuals hoard surplus wealth. He urged government officials to embrace a deeper comprehension of contemporary economic theories and adjust their strategies accordingly. Obi said there is a need to focus on fixing structural weaknesses and introducing initiatives to enhance efficiency and openness in the economy. His comments came after the Economic and Financial Crimes Commission (EFCC) carried out raids on illegal BDC operators across different regions of the country on February 21, 2024.
It was reported that the government’s recent actions are aimed at reducing illegal financial activities and ensuring compliance with regulations in the foreign exchange market. Up until now, economists have echoed Obi’s emphasis about Nigeria’s FX crisis, largely caused by the drop in oil revenue. The government has received a range of suggestions on ways to improve FX liquidity in order to address the country’s forex crisis. One of the proposed actions includes encouraging a wider variety of exports. Nigeria’s economy is overly dependent on Revenue from oil exports, leaving it vulnerable to changes in global oil prices.
Promoting exports can potentially fix FX earnings.
In order to address this vulnerability and enhance FX liquidity, it is recommended that the government should focus on expanding the range of exported goods by providing assistance to non-oil industries like agriculture, manufacturing, and services. By promoting exports in these sectors, it is believed that the country can increase its foreign exchange earnings and lessen its reliance on oil revenue. Another recommendation for the government is to simplify administrative procedures and lessen regulatory obstacles in order to entice Foreign Direct Investment (FDI) and boost economic expansion. It has also been suggested that implementing clear and stable economic policies can build trust among international Investors and attract financial investments.
Economic experts believe that Nigeria’s economic environment can be stabilized and made more predictable by implementing transparent fiscal and monetary policies, alongside a commitment to upholding the rule of law, which in turn will instil confidence in investors. The Central Bank of Nigeria (CBN), charged with controlling FX liquidity with its monetary policies, is advised to enforce effective monetary measures to keep prices stable, control inflation, and boost confidence in the local currency to attract international investments. Suggestions have been made for the government to create schemes that promote diaspora remittances, such as providing rewards for using official channels, lowering transaction costs, and making it easier for recipients to access financial services.
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To combat illegal financial activities and protect foreign exchange reserves, it is important to enforce strict anti-corruption policies and enhance accountability and transparency within institutions. Additionally, focusing on essential Infrastructure developments like transportation, energy, and telecommunications can boost productivity, cut expenses, and draw in investments. It is recommended that the government implement programs to increase financial inclusion, attract more investors and boost economic growth. This will help improve the availability of foreign exchange and support overall liquidity in the market.