Presently, Nigeria is in a huge financial crisis which is deepened by the removal of fuel subsidy and the acute dollar scarcity.
On May 29th 2023, President Bola Ahmed Tinubu at his inauguration announced that: ‘’fuel subsidy is gone.’’
This announcement prompted panic to fuel marketers across the country who caused artificial scarcity and sharp increase in fuel prices.
Premium motor spirit (PMS) which used to sell at N200/liter, now sells for N488/liter. It has now been officially removed as at mid-June 2023.
He also announced and suggested to the Central Bank of Nigeria, that the Nigerian Forex should be harmonized and be brought under one window.
The forex will now be sold under the Investors and Exporters Window (I&E). This window will prevent distortion and will aid transparency in the forex markets.
‘’The I&E market functions as a willing buyer and willing seller system, where an entity with FX seeks out another entity with FX to sell at an agreed price through an authorized dealer,” the CBN stated.
This way, the currency has been pegged and the Naira will trade freely. This policy, which was praised and welcomed by the IMF, will encourage Foreign-Direct Investment and boost confidence in our Forex markets.
However, it has caused chronic forex scarcity.
The dollar now sells at N770/$. There are even indications that commercial banks are ignoring the CBN’s directive of allowing customers to withdraw as much as $10,000 from their domiciliary accounts.
Findings show that banks are still restricting customers from withdrawing such amounts of foreign currency from their accounts; claiming that the dollar is still scarce.
Dealers and customers are lamenting furiously about how the situation has really impeded supply of foreign currency into the market. It got so scarce that the CBN had to intervene in the I&E window last Thursday, albeit at very short supply.
Since the new reforms were announced some two weeks ago, Naira has depreciated by 63 percent in the I&E window, from N471.67 on June 13th, to N755 per dollar in the same period: a 20 percent decrease.
A black market (also called parallel market) trader, MallamUmoru Mohammed, said: ‘’here in Ikorodu, business has been dull and not many people sold dollars to us hence I was unable to get supply of dollars due to the higher demand of dollars than supply.’’
‘’I see the Naira depreciating to N800 per dollar due to the inability of traders to meet the demands of buyers as we approach the remaining half of the year but if there is more forex inflows, the reverse will be the case.’’
A Bureaux De Change (BDC) operator , and an executive member of the Association of Bureaux De Change Operators of Nigeria (ABCON), said:
‘’There is nothing like BDC exchange rate because the CBN is not selling dollars to the BDCs. We all compete with the parallel market operators for dollars and as such we have to ensure our rates match theirs.
‘’But I believe that the Naira will appreciate in the coming weeks. The sharp depreciation of the Naira in the I&E window, I believe is to encourage investors and Nigerians in Diaspora to bring in their dollars.
‘’Once this happens, the exchange rate will gradually go down.’’
Meanwhile, the Nigerian Labour Congress (NLC) called for a nationwide strike action on Wednesday, June 7th. Although it didn’t happen, it was really serious.
Following a meeting of the National Executive Council (NEC) in Abuja, it was reported that the meeting between the federal government and the NLC over fuel subsidy removal ended without a consensus.
The NLC insisted that the federal government did not offer any palliative measures for Nigerians, hence the rejection of the latest announcement.
Till date, there has still been no palliative measures to cushion the harsh effects of fuel subsidy removal (as Nigerians rely on fuel for everything), discussions are still ongoing.
Developments to be Made Under the Leadership of President Bola Ahmed Tinubu (First 100 Days)
The current Nigerian president, Bola Ahmed Tinubu was officially inaugurated as president on the 29th of May 2023.
As expected, he has so many issues that are meant to be solved. First, he takes over a divided country with an economy in turmoil which he must fix as quickly as possible.
The Nigerian economy has significant macroeconomic challenges that cuts across the real, fiscal and external sectors. There’s already little confidence in Africa’s largest economy, with high insecurity level and constrained business environments.
What he needs to prioritise in his first 100 days in office according to some analysts polls are that, he needs to: fix our foreign exchange market, remove petrol subsidy and raise revenues. These issues must be on the front burner.
Already, on his inauguration, he announced that petrol subsidy is gone and suggested to the Central Bank of Nigeria to harmonise all the forex markets into one window instead of the multiple windows they used to operate on.
The reason for this decision on for fuel subsidy is to generate more revenue for the federal government, then for the forex is to restore investor confidence back to Nigeria.
Presently, the Naira (the Nigerian currency,) is allowed to float according to economic performance and the global dictate.
These decisions brought excitement into the Nigerian finance sector and the public at large. The most important was the International Monetary Fund (IMF,) who have for years under the previous administration, issued these advice but they refused to heed them.
The IMF said: ‘’we welcome these economic decisions from the Nigerian government.’’
Nigerians were also upbeat by the key decisions he took on some agency heads: the suspension of the former Central Bank Governor, Godwin Emefiele over his abysmal handling of the country’s economy for the past nine years.
A similar treatment was also meted out on the chairman of the Economic and Financial Crimes Commission (EFCC,) over weighty allegations of corruption accusations.
Many citizens are now convinced that the president is actually conscious of the Nigerian situation by the way he speaks assuredly on these issues.
Some Nigerians are of the opinion that he took quick decisive decisions that took the past administration years to come by or completely overlooked, have been done some few days or hours of the current administration.
Also, some believe that Nigeria has unlocked some successes due to the critical decisions taken so far which includes: fuel subsidy removal, Electrical Act 2023, the data protection Act, the Student Loan Act and the Unification of the foreign exchange market.
There are also indications that President Bola Tinubu Advisory Council has recommended that the Nigerian Customs Service, the Nigerian Maritime Administration and Safety Agency, NIMASA and the Federal Inland Revenue Service, FIRS, be merged.
This was proposed by the council in order to enable an efficient collection of all direct and indirect taxes, as well as levies on behalf of the Federal Government. However, it has been implemented a few weeks ago by his administration.
Although some of the president’s plans are still unclear, many still have confidence in him.
However, the country is presently facing hyperinflation; prices of goods and services are extremely high and salaries are yet to be increased . But the president on his inauguration, begged Nigerians to endure a little.
Speaking on the impact of the students’ loan scheme, Prof Adigun Agbaje, former Deputy Vice Chancellor, University of Ibadan said the bill was a welcome development.
According to him, Nigeria needs a government that is able to address the issues of the education sector holistically.
This initiative is a step in the right decision. It’s a meaningful step and it tells the story that perhaps this government is going to take on critical issues and make advances in terms of moving the country forward.
‘’It is a welcome development, there will be challenges but they will be tackled as it comes. This is a step in the right direction but can only make more impact than we begin to address the leakages in our economy,’’ he said on Arise TV.