- Nigerian government plans to automate the entire foreign exchange market to monitor transactions closely, penalize speculators, and stabilize the Naira
- The move follows Naira devaluation and includes measures to clear a $3 billion backlog of forex contracts and boost market predictability
The Nigerian government has announced plans to automate transactions in the entire foreign exchange market in an effort to curb wide arbitrage and penalize naira speculators.
Wale Edun, the Minister of Finance, revealed this at the Nigeria Economic Summit. The automation will cover all dealings in the forex market, from official transactions to money changers. It aims to closely monitor all transactions and punish offenders. This move is in response to the continuous devaluation of the naira and attempts to curb speculation.
The naira has seen a significant decline in value in recent weeks, with the exchange rate reaching N1,220 to the dollar at the black market. The currency’s devaluation is due to various economic factors and issues, prompting the government to take measures to stabilize the forex market.
The government has also introduced executive orders to boost the money supply and incentivize the issuance of foreign currency. The goal is to revamp the foreign exchange market to ensure that all legal and legitimate transactions occur within the formal foreign exchange market, with any activities outside this framework considered illegal and subject to punishment.
Additionally, the government has plans to clear the backlog of foreign exchange contracts that have caused a lack of confidence among investors.
The Central Bank of Nigeria (CBN) had sold forward contracts to businesses but has not settled these contracts since February 2023, resulting in a backlog of approximately $3 billion. The CBN’s failure to clear the dollar backlog has put pressure on forex liquidity, leading to the suspension of various transactions.
At the summit, CBN Governor Yemi Cardoso emphasized the importance of a foreign market that is predictable, without opacity, and fit for everyone. He pledged to come up with clear rules for the forex market.
The Nigerian Economic Summit is focused on addressing the challenges facing the country and providing viable solutions to boost the economy. President Tinubu also announced that the federal government’s student loan scheme will commence in January 2024, aiming to end industrial actions in the country’s tertiary institutions by providing access to interest-free student loans.