Naira makes remarkable recovery in official, black market after FG’s threat to tax parallel market

The naira made a marginal recovery on Wednesday, October 25, 2023, after days of freefall at both the official NAFEM and parallel markets.

The local currency had tumbled to N1,310 to the dollar in the parallel market, sparking fear among Nigerians that it could hit N2,000 to a dollar before December.

But on Wednesday, October 25, 2023, the fortunes of the Nigerian currency reversed after trading at N1,300 per dollar on the streets from the N1,310 recorded the previous day.

It gained even more in NAFEM, trading for N801.10 from the N847.77 it sold on Tuesday, October 24, 2023.

The Nigerian currency has been weighed down by a lack of Forex in the system, which caused high inflation at 26.7% as of September and high living standards.

Analysts believe that Nigeria has about $7 billion FX backlog weighing down on the economy, with the government stating that it expects a $10 billion inflow in the coming weeks.

FG expects a $10 billion forex inflow

The Minister of Finance and Coordinating Minister of the Economy, Wale Edun, disclosed in a recent conference organised by the Nigerian Economic Summit Group (NESG) that the expected Forex inflow will ease liquidity in the system.

The naira recovery comes amid threats by the federal government to implement an excise tax on Forex transactions outside the official market to discourage multiple exchange rates in the country.

The Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, stated this on X. Oyedele said the imposition of excise tax on Forex transactions outside the official market is being considered.

His statement is one of the 20 recommendations the Tax Reform Committee presented. The move aims to address critical economic issues from exchange rate management, fuel subsidy removal impact, and economic growth.

According to reports, the Nigerian FX market has witnessed continuous depreciation, with the naira falling over 50% following the unification of the Forex windows.

The development has led to a wide gap between the official and parallel markets. Oyedele said there are plans to digitalise Nigeria’s fx regime, discourage speculative demands, and the hoarding of FX in cash.

He said: “Discontinue the FX verification portal and requirement for Certificate of Capital Importation and export proceeds restriction.”