The Nigerian government is considering making it illegal to trade in the foreign exchange parallel market in a bid to control a chronic dollar shortage and an unprecedented fall of the naira, an official has said.
The government plans to widen the official currency market to include other “legitimate” participants, including bureaux de change and financial-technology companies, Taiwo Oyedele, chairman of the presidential committee on fiscal policy and tax reforms, said at the Nigerian Economic Summit in Abuja on Monday.
“We currently have a market that is not working and it’s not going to work in its current format,” he said, according to Bloomberg. “We don’t have sufficient liquidity even if you combine the parallel and the official markets.”
The nation’s economic fiscal and monetary policy managers reacted Monday as the naira continued to decline, seeking to give hope of improvements in the coming weeks.
The naira fell about 4% to 1,215 a dollar on Monday, over a week after the central bank ended a ban on the use of dollars for the importation of 43 items, including rice and cement.
The bank aimed to make the black market less attractive to importers, but the policy hasn’t yielded positive change.
Expecting $10 billion
Finance minister Wale Edun said Nigeria expects $10 billion in foreign currency inflows in the next few weeks to ease shortage of dollars that has pushed the local currency to record lows.
Central bank governor Yemi Cardoso said the naira will adjust once rules for market participants are made clear.
Edun said President Bola Tinubu on Thursday signed two executive orders to allow domestic issuance of instruments in foreign currency and also allow all cash outside the banking system to be brought into the banks.
“The market is illiquid, it’s not functioning properly because there is not enough supply of foreign exchange,” Edun said at the conference. “As part of a wider review, there’s a revamping of the foreign-exchange market such that the foreign-exchange market will be simplified, it will be digitalized and it will be reformed.”
“There is a line of sight on $10 billion worth of inflow of foreign exchange in a relatively near future, in weeks rather than months,” he said. He didn’t disclose details.
He said foreign exchange would also come from NNPC’s crude oil sales and foreign investment firms willing to invest in Nigeria.
“These measures taken as a whole and comprehensively should lead to the flow of foreign exchange.”
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