'It's a promise' - Expect stronger Naira as FG moves to crash Dollar with $10bn inflows in few weeks

The Nigerian government said the country is expecting about $10 billion in foreign currency inflows in a few weeks to ease the dollar shortages in the country in the Forex market.

The Minister of Finance and Coordinating Minister for Economy, Wale Edun, stated this at the ongoing conference organized by the Nigeria Economic Summit Group (NESG).

Naira crashes to N1,200 per dollar in the black market

Edun's promise comes as the naira plummeted to N1,200 per dollar in the parallel market on Monday, October 23, 2023, from the N1,180 it traded on Friday, October 21, 2023.

The naira also crashed to N808 to a dollar at NAFEM, the official exchange rate market.

The Minister revealed that President Bola Tinubu, on Thursday, October 20, 2023, signed two executive orders to strengthen the local currency market, which has crashed to its lowest in history since he became President on May 29, 2023.

Nigeria expecting $10 billion Forex inflow soon

Edun said the government would allow domestic issuance of instruments in foreign currency and let all cash outside the banking system be mopped up into the banks as measures to strengthen the naira.

Africa's largest economy is in the middle of a Forex crisis following the devaluation of its currency, which has seen it crash in the official and parallel markets.

BusinessDay reports that the devaluation has also caused a hike in living standards, affecting businesses and households.

Experts also said the currency crisis is responsible for a surge in inflation, which hit 26.7% in September 2023.

The country is also battling a $10 billion demand backlog that has eroded investors' confidence in the new government's foreign exchange reforms.

Experts blame CBN for Naira's crash

Former Deputy Governor of the Central Bank of Nigeria, Tunde Lemo, criticized the naira float, stating that the move was terrible as Nigeria does not have enough export products.

The 63-year-old Lemo said the naira should not be floated because it is not a convertible currency like the dollar, euro, or the Japanese Yen, stating that even the Chinese Yuan is managed.

He said: "Why would anybody just say that we should free up naira when we don't have the reserve level and trade, Ance of payment deficit?"

He asked the CBN to clear backlogs in the Forex market to restore confidence and boost naira's value.

According to Lemo, the new CBN team must seek to restore confidence in the currency market, stating that issuing circulars and banning products does not provide clarity.

He stated that the development means Forex participants will not be rational.

Naira, not a convertible currency

He said the apex bank has been defaulting on most of its commitments, citing the $6.8 billion backlog in swap deals, forward deals, and commitments by foreign airlines, which still need to be met.

On June 24, 2023, the Nigerian government announced a free float of the naira and collapsed the exchange rate windows.

The new policy led to the depreciation of the naira by over 50% and caused a wide disparity between the parallel and exchange rate markets.