Toba Owojaiye Reporting
President Bola Tinubu addressed the Nigerian Economic Summit Group (NESG) conference in Abuja, offering a ray of hope to a nation grappling with a burgeoning foreign exchange (FX) crisis. Speaking with unwavering determination, the President vowed to clear the FX backlog and reinvigorate investor confidence in the country’s FX reforms.
Tinubu, whose administration has been marked by high expectations, delivered a resounding message, stating, “Let us build a future of renewed hope. My government is prepared. Are you ready?” His ambitious vision entails financing a Three Trillion Dollar National Infrastructure Stock in a mere decade, a stark contrast to the previously estimated three centuries.
He pledged to expedite the development of megacities across Nigeria’s geopolitical zones and the creation of a fully networked and connected nation by rail, gas, fiber optics, and road network within two decades.
The heart of the crisis lies in the failure to honor forward contracts, as the Central Bank of Nigeria (CBN) had sold these contracts to local businesses. These contracts were meant to provide access to dollars at agreed prices in the future, but they remain unfulfilled since February 2023, resulting in an approximate $3 billion backlog.
The broader issue extends to foreign investors’ unsettled contracts, amounting to an estimated $10 billion. Correspondent banks are now withdrawing support from Nigerian banks, adding to the FX turmoil.
Local banks are grappling with a tight FX liquidity situation due to the backlog, leading to the suspension of critical transactions, including school fees and Personal Travel Allowance applications. Consequently, the embattled naira has surpassed the N1000/$ mark in the parallel market, with fears it could reach N2000/$.
The official exchange rate has also plummeted to roughly N1000/$, driven by the CBN’s newfound tolerance for the naira’s depreciation and sustained demand for scarce dollars.
Tinubu’s pledge to address this crisis is significant, as it not only promises economic stability but also aims to restore international confidence in Nigeria’s FX market. Investors and citizens alike will be watching closely to see if the President’s words translate into concrete actions that can resolve the FX backlog and put the nation on the path to economic recovery.
Credit: Twitter