The federal government has disclosed that it may inject some foreign exchange into the economy to shore up the value of the naira while market forces stabilise.
The Special Adviser to the President on Special Duties, Communication and Strategy, Mr Dele Alake stated this on Wednesday while speaking with reporters in Paris.
Alake is part of President Bola Ahmed Tinubu’s team attending the new global financial pact summit in Paris, France to facilitate foreign direct investment into Nigeria.
Alake’s comment is coming on the heels of the recent exchange rate unification which saw the Naira experiencing a significant surge against the US dollar at black market.
On Wednesday, June 21, 2023, the naira traded at an average exchange rate of N758/$1, marking a remarkable increase of 2.82% compared to the previous day’s trading session where the dollar was valued at N780/$1.
This is as a total of $788 million has so far been recorded as cumulative turnover in the official Investor & Exporter Window, a week after the unification of the exchange rate was announced.
Although the presidential spokesman was not specific about the nature of the dollar injection, he said: “Don’t forget that Mr. President has taken some very bold steps in the area of economy, in the area of social engineering in the last few weeks, and particularly with reference to the unification of the multiple exchange rates, which has caused very positive multiplier effect.
“However, in the short term, we have noticed and expected that there will be a slight spike in the demand and then that would affect the value of the naira viz-viz the dollar. So, apart from the immediate, short and long term positive effects of that unification policy, there could be a need for an injection of direct foreign exchange into the economy to shore up the value of the naira while market forces stabilise. And in the short run or medium term, there is going to be when the effects of this policy begin to mature.”
He said the president’s policies in the last three weeks had encouraged the foreign nations and investors to become more interested in the affairs of Nigeria, shoring up the country’s economy.
The special adviser also said heads of state and international financial institutions had indicated interest to meet with the president to consider areas of cooperation with the new positive development in Nigeria.
Alake expressed optimism that a lot of international investors that exited Nigeria because of restrictive currency policies would return with the new economic measures being put in place as the nation needed a comprehensive and robust direct foreign investment into the country.
How the Naira has fared
Since its launch a week ago, the naira-to-dollar exchange rate has fluctuated, plunging 29% to N664/$1 on the first day.
Before ending the week marginally stronger at N664/$1, it dropped further to N702/$1.
The I&E Window shut down on Monday at N770.3/$1 then reopened on Tuesday, June 20, at N756.6, continuing the volatility that had been dealt with ever since the unification process began.
For the first time since 2018 when it was approximately N363/$1, the official currency rate also reached parity with the black-market rate.
Additionally, N790/$1 was reported as the highest daily rate transacted at the I&E Window on Monday, June 19, 2023.
While the FMDQ publishes the turnover of forex traded daily, it is not totally representative of the actual amount of forex bought and sold in general. However, it provides a proxy for the level of liquidity in the I&E Window.