Nigerian Naira again: “The Central Bank of Nigeria (CBN) on Friday injected $197.71 million into the foreign exchange (FX) market in a bid to restore calm as the naira crashed to N1,600 per dollar—its weakest official exchange rate since December—under growing pressure from global economic shocks, including a 14% import tariff recently imposed on Nigeria by the United States.”
Ideally, Nigeria should not inject funds to stabilize Naira since it is floated. A floating regime will require the market forces to do the job. That we are still injecting funds after two years does imply Naira cannot swim in a sea of global currencies when floated. Simply, Naira does not have the productive life jackets to float!
Mr. Governor, save Naira: peg it to N1,200/$ and allow it be. I have an Excel sheet where I’ve tracked the gains and losses as a result of the float. My data showed me that Naira is still being subsidized, not by the government, but by the private sector. That subsidization by the private sector is costing the government massive revenue. So, companies like MTN which used to send tons of money as tax have nothing to send.
My data shows that the opportunity cost (revenue, investment, asset value, etc) and the extra borrowing associated due to the loss of revenue from the private sector is close to the amount the government was originally spending on the Naira subsidy before the float. By the time I modeled asymmetric impacts like loss of venture funding for startups which was triggered by the floating, it becomes a negative policy on national economic competitiveness and growth.
I am an investor and I speak with dozens of global investors yearly. The #1 Naira problem is the volatility and not necessarily the exchange rate. But since we are still injecting funds to stabilize Naira because the US sneezed tariffs, why not just peg it? Mr. President is rational as an accountant, and will see this from the numbers. As always, my highest respect and I close from my June 2023 post: “Nigeria’s floating of its currency, while progressive, will cause severe perturbations in the economy – and a stable state may not come as most experts have predicted.” This injection of funds means the system is still unstable after 2 years
