Nigeria’s ambitious foreign exchange reforms under President Bola Tinubu have not met expectations, with critics pointing to poor execution.
Over the past year of Tinubu’s administration, the naira has lost 65 percent of its value against the US dollar in the official market, following two de facto devaluations by the Central Bank in its efforts to move towards a market-determined exchange rate. According to data from
the FMDQ Securities Exchange Limited, the naira’s value dropped to N1,339 per dollar as of May 27, 2024, from N463 in May 2023.
Former Nigerian President Olusegun Obasanjo, a critic of Tinubu’s reforms, argued that the removal of the petrol subsidy and the unification of FX windows were implemented incorrectly. “Today, the government has made three major decisions, two of which were necessary but poorly executed, resulting in economic hardship for Nigerians,” Obasanjo stated.
Former President Olusegun Obasanjo highlighted three key actions: removing subsidies, closing the gap between black market and official exchange rates, and addressing a military coup in Niger Republic.
In the past year, the naira has depreciated by 49.47 percent in the parallel market, where it traded at N1,500 per dollar compared to N758 per dollar in April 2023.
Initially, the naira strengthened after the Central Bank of Nigeria (CBN) cleared foreign exchange obligations to manufacturers and local banks and adopted more transparent pricing.
The CBN’s aggressive interest rate hikes, totaling 750 basis points this year, have attracted foreign inflows by reducing the negative real return on naira investments but have not controlled inflation, which is at a 28-year high.
During this period, Nigeria’s external reserves also fell by 7.21 percent to $32.763 billion as of May 22, 2024.
“The unification of foreign exchange rates by President Tinubu’s administration was a good idea, but the main issues have been with implementing the policy and managing the changes,” she said. She mentioned gaps in engaging stakeholders,
educating the public before implementation, aligning policy initiatives, and ensuring structural and systemic cohesiveness.
Economic commentators have pointed out that without an adequate supply of foreign currency, the exchange rate will remain unstable. They believe that improving market structures and systems, along with providing enough time to inform market operators, stakeholders, and the public about the policy and its implications, should have been done before implementation.
In September 2023, Tinubu appointed Olayemi Cardoso as the CBN Governor following the resignation of Folashodun Shonubi, who had been acting governor since Emefiele’s suspension. All deputy governors under the former governor also resigned.
Since taking office, Cardoso has implemented new policies and modified existing ones to tackle FX demand pressure, boost dollar supply, and stabilize the Naira.
