Seven days to December 31: Forex experts cast doubts on actualisation of $750/Naira target
Following the declaration by the Federal Government to achieve between $650 – $750/Naira exchange rate by the end of the year, Forex experts have expressed skepticism on the actualisation of the target set.
The Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele while speaking in an interview with Bloomberg in October had predicted that the true value of the naira would be reflected by December.
He said the government will be introducing new foreign exchange rules (already part of the recommendations his committee made to President Bola Ahmed Tinubu), including a crackdown on illegal currency trading, to help the naira reach a “fair price” of N650-750 to the dollar by year-end.
Oyedele revealed that the government plans to clear a backlog of dollar demand, bolster the naira forward market, and set transparent rules for the official market.
He added that the government also wants to expand the official market to include all legitimate transactions while snuffing out the illicit “black market” for foreign currency.
As at Friday December 22, 2023, the Dollar was trading to the Naira at N1039.63 on the official market as disclosed by the Central Bank of Nigeria.
However, throughout last week, the Naira demonstrated resilience showing signs of a possible comeback by the end of the year. The naira was trading between N855 – N1039.83 last week to a dollar.
Professional trader and tutor, Hamzat Abiodun in an interview with NewsDirect however expressed skepticism about Nigeria’s ability to achieve its exchange rate goals.
Abiodun, who is well-versed in the intricacies of the financial market, questioned the feasibility of the plan given the current state of the country.
In an interview with our correspondent, Abiodun stated, “I currently do not possess any functional document outlining the strategy for achieving the exchange rate goal. I am curious about how they plan to accomplish it given the chaotic state of the country.
“I am unsure where they have stated their intentions, and their plan for achieving this goal remains unclear to me. The available information does not provide sufficient details on how they plan to accomplish this in the near future.”
Also, Omoniyi Samuel, Forex trader expressed skepticism regarding the Nigerian government’s target to achieve a $750/Naira exchange rate by the end of the year.
Samuel argued that the current exchange rate of approximately $1039.63/Naira, coupled with the prevailing global economic conditions, makes it highly improbable to achieve such a target within a few days.
Samuel emphasised that the government must prioritize improving the country’s economic fundamentals to alleviate pressure on the naira. Key areas of concern include addressing inflation, unemployment, and the high cost of doing business in Nigeria.
According to him, “I believe that the FG’s target to achieve $750/Naira by the end of the year is highly unlikely.
“The current exchange rate is hovering around $1039.63/Naira, and it would take a significant shift in the global economy and a drastic change in government policies to achieve such a target in just a few days. To reduce the pressure on the naira further, the government needs to focus on improving the country’s economic fundamentals.
“This includes addressing issues such as inflation, unemployment, and the high cost of doing business in Nigeria.
“The government should also explore ways to increase foreign investment in the country, such as providing incentives for foreign investors and improving the ease of doing business.
“Achieving a stable and sustainable exchange rate requires a long-term approach that involves addressing the root causes of the country’s economic challenges.
“It is good to see the fiscal and monetary policy authorities working in sync. We have not seen that in a while.
“However, we need them to shed more light on actions being taken and how they intend to use them to strengthen the economy and ensure we have more exports to help the currency.
“I am not sure that a reorganisation of the banking sector alone can bring about the stability we seek. We need to see a lot on the fiscal side for that to happen.
“I also do not think the government should be giving exchange rate targets.” He said.
