How unified exchange rate will enhance FDI, yield positive result
By Sodiq Adelakun
The announcement of the policy to unify the currency should have a long-term positive effect on foreign exchange rate and free flow of capital in the country. This is according to a recent report by Utica Capital Limited in a bid to reveal how the foreign exchange liberalisation policy of the Tinubu regime will boost Nigeria’s foreign exchange rate and enhance free flow of investment capital into the country.
Some investors have applauded President Tinubu for his giant moves, seeing them as signals that he is keen on resetting the country’s economy on an orthodox path. The currency moves followed the scrapping of a fuel subsidy that cost the country $10 billion last year. That was announced in the inauguration speech and two days later state oil company NNPC said the pump price of petrol had risen more than 200 per cent from N189 per litre to between N480 and N570 per litre.
Recall that President Bola Ahmed Tinubu, has “set the ball rolling” as promised during his campaign. In his first speech delivered at the swearing-in ceremony, which was held on May 29, 2023, he reiterated several macroeconomic initiatives aimed at creating employment and improving overall productivity.
Meanwhile, two major highlights of the stated initiatives were removing government subsidies on Premium Motor Spirit (PMS) and unifying the country’s exchange rate.
It was learnt that, in Nigeria, there are four foreign exchange (FX) markets: the Interbank FX market, the Investors and Exporters (I&E) window, Bureau De Change (BDC) window and the Small and Medium Enterprises (SME) window.
Meanwhile in the recent report expressed by the Utica Capital Limited (UCL) in its latest report dated June 2023, titled, “Assessing Nigeria’s Next Macroeconomic Direction under President Bola Ahmed Tinubu.”
The report provide the need of unification of currency stating that it would have a long-time positive effect on foreign exchange rate and free flow of capital in the country.
The report read in part, “The announcement of the policy to unify the currency should have a long-term positive effect on foreign exchange rate and free flow of capital in the country,” adding that the announcement by the new administration has started yielding “a positive impact on the equities and foreign exchange markets.
“Investors in the equities market experienced favourable returns, with all market indices showing gains. This was primarily due to increased confidence in the new government,” it added.
It was learnt that realising these positive effects would largely rely on the political will and determination of the new administration to execute its reform minded policies.
It further read, “It will require effective enactment and harmonisation to implement them, and legacy challenges would need to be eliminated completely.
“As Nigeria moves forward, eyes are on the new administration to deliver on its promises,” the report stated.
The UCL also commended Tinubu’s administration strategic economic focus on enhancing the capacity of the Nigerian manufacturing sector and bolstering entrepreneurship and startups in order to create job opportunities in the domestic economy.
It, however, advised the government to facilitate better access to credit facilities and tax incentives to businesses in the private sector in order to achieve these goals.
It further identified as viable economic options the administration’s, “intention to initiate a significant public work program and implement a national industrial policy that focus on infrastructure investment, value added manufacturing, and targeted agricultural development.”
The UCL added that the government would seek, “to enhance capacity building by providing ICT-enabled training programs for Nigerian youths. It also seeks to facilitate funding access for start-ups and technology manufacturing while improving transportation infrastructure to support e-commerce.”
It further observed that the administration was committed to implementing digital services and promoting the utilisation of blockchain technology by 2025.
The UCL noted: “Infrastructure development remains a prominent agenda for the administration, with a continued emphasis on strategic projects such as roads, bridges, water systems, seaports, and airports throughout the country.
“Additionally, the administration also pledges to close the housing gap by constructing over five million houses within the next four years. While we acknowledge the huge funds required to drive these projects, the president hinted the use of a Public Private Partnership as a financing model.”
The report expressed confidence that the wealth of experience garnered by the Tinubu and his Vice President, Senator Shettima as former Governors and legislators would equip them with enough political sagacity and enable them to see through their economic vision for Nigeria.
It added, “President Tinubu and his vice president previously served as Governors of Lagos and Bornu States, respectively. They also previously served as members of the country’s National Assembly (The Senate).
“Before his regime as Governor of Lagos State in 1999, several challenges such as abysmal infrastructure, poor waste management and traffic congestions besotted the state. His administration pursued a 10-point agenda to tackle these challenges.
“Tinubu’s involvement in politics revolved around two significant aspects: his tenure as Lagos State Governor (1999 to 2007) and his subsequent engagement as the leader of the All Progressive Congress (APC) political party. Before this, he played a pivotal role in facilitating the merger of various political parties to form the APC party,” the report added.
