In a recent statement, a Nigerian authority revealed that the country, which is grappling with foreign exchange shortages, intends to broaden the scope of its official foreign exchange market to include recognized entities such as bureaux de change and financial technology firms. Finance Minister Wale Edun additionally indicated that Nigeria is set to attract $10 billion in foreign currency inflows in the coming weeks.
Nigeria Ponders Prohibition of Unofficial Foreign Exchange Market
Taiwo Oyedele, a member of President Bola Tinubu’s committee on fiscal policy and tax reforms, announced plans to widen the official currency market to encompass recognized market players like bureaux de change and fintech companies. Speaking at the Nigerian Economic Summit on October 23, Oyedele also disclosed that the government is contemplating outlawing transactions in the foreign currency parallel market.
Oyedele, who presides over the committee on reforms, made these remarks on the same day the Nigerian naira reached a low point against the U.S. dollar in the parallel market. Citing a Bloomberg report, the local currency depreciated to 1,215 naira per dollar in the unofficial market, while the dollar-to-naira exchange rate in the official market remained at 1:795.
This devaluation of the naira against key international currencies occurred just weeks after the Central Bank of Nigeria (CBN) lifted import constraints on 43 items. According to a news report by CryptokenTop.com, the CBN had anticipated that the alleviation of these restrictions would curb the devaluation of the naira in the parallel market.
Authorities Anticipate $10 Billion in Foreign Currency Inflows
Even with these measures instituted by the CBN, the naira continues to weaken against the dollar, raising concerns that it may soon cross the 2,000 mark. Oyedele attributed the ongoing depreciation of the naira to an insufficiency in liquidity.
“We are currently dealing with a dysfunctional market that cannot sustain itself in its present configuration. The lack of adequate liquidity remains a problem, even when considering both the parallel and official markets together,” stated Oyedele.
Separately, Finance Minister Wale Edun has stated that Nigeria expects to secure $10 billion in foreign currency inflows within the near future. However, Edun abstained from providing further specifics about the projected capital inflow, referring to it only as a “line of sight.”
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Frequently Asked Questions (FAQs) about currency market expansion
What is Nigeria’s plan regarding its official currency market?
Nigeria aims to broaden its official currency market by including recognized entities like bureaux de change and fintech companies.
Is there a consideration to make trading on the parallel forex market illegal in Nigeria?
Yes, the government is contemplating making transactions in the foreign currency parallel market illegal.
What has been the recent performance of the Nigerian naira in the unofficial forex market?
The Nigerian naira recently depreciated to 1,215 naira per dollar in the parallel market.
How has the removal of import restrictions by the Central Bank of Nigeria (CBN) affected the naira’s value?
The naira’s devaluation in the parallel market occurred shortly after the CBN removed import restrictions on 43 items, hoping to curb the currency’s depreciation.
What is the expected foreign currency inflow into Nigeria, and who announced it?
Finance Minister Wale Edun announced an anticipated $10 billion in foreign currency inflows in the near future but did not provide specific details.
What is the reason cited for the ongoing depreciation of the Nigerian naira?
The depreciation of the naira is attributed to a lack of sufficient liquidity in the forex market, according to Taiwo Oyedele, a member of the committee on fiscal policy and tax reforms.
More about currency market expansion
- Nigeria Plans to Include Fintechs in Broadened Official Currency Market
- Nigeria Contemplates Outlawing Forex Parallel Market
- Bloomberg Report on Nigerian Naira’s Performance
- Central Bank of Nigeria (CBN) Lifts Import Restrictions
- Finance Minister Wale Edun’s Statement on Foreign Currency Inflows
- Nigerian Economic Summit