To address the country’s persistent forex crisis, Nigeria’s incoming president, President Bola Ahmed Tinubu, has pledged to harmonize the nation’s several exchange rates.
The President first revealed this information during his inauguration in the nation’s capital, Abuja after taking the oath of office,
Speaking about his plans for the upcoming four years, Mr Tinubu stated that his administration will work to unify the many exchange rate regimes now in place throughout the nation’s FX channels. Consequently, the first step has been taken, commercial banks have been asked to trade FX freely by the CBN.
The International Monetary Fund (IMF) and the World Bank had earlier warned that for the country to fix its economy, it must raise tax rates, particularly the value-added tax (VAT), from 7.5 to double digits, adopt a single exchange rate system, eliminate fuel subsidies, and raise the benchmark interest rate to lower inflation, which is currently at 22.22%. President Tinubu’s pledge is in line with their recommendations.
Nigeria’s benchmark interest rate at the moment is 18.5%. Following the 291st meeting of the monetary policy committee (MPC) held by the Central Bank of Nigeria (CBN) in Abuja, it was increased from 18.0% a few days earlier.
According to experts, this will cause lending rates to rise and worsen the Nigerian economy’s lack of competitiveness.
President Tinubu also stated that his administration would strive for a loan rate in the single digits to encourage more foreign investment and improve the performance of Africa’s largest economy.
“Monetary policy needs a complete spring cleaning. To achieve a single exchange rate, the Central Bank must work. As a result, money will be diverted from arbitrage into significant investments in the machinery, tools, and employment that drive the actual economy. Interest rates must be lowered to spur consumer spending and investment and keep the economy growing”. He said.