Amid assurances from President Bola Ahmed Tinubu that Nigeria is open for business, a persistent forex crisis continues to cast a shadow on the country's financial stability and international reputation. Despite claims that barriers to investment have been dismantled, the ongoing struggle with foreign exchange has far-reaching consequences.
President Tinubu's recent statement in Germany, emphasizing Africa's evolution beyond business disincentives, contradicts the grim reality on the ground. The key to restoring investor confidence lies in the seamless repatriation of funds, an aspect crucial for businesses operating in Nigeria. However, foreign businesses have reportedly lost over N900 billion in 2023 alone due to the devaluation of the naira.
The heart of the issue lies in the liquidity challenge within Nigeria's forex market. The Central Bank of Nigeria (CBN) has accumulated over $10 billion in forex forwards, affecting various sectors, with the airline industry particularly hit. International Air Transport Association (IATA) criticism, stranded aircraft, and rising airfares are symptomatic of the broader crisis.
The forex scarcity extends beyond foreign airlines, impacting local carriers, manufacturers, and the pharmaceutical industry. Azman Air faces stranded aircraft, and drug prices are on the rise due to high forex costs for importing Active Pharmaceutical Ingredients (APIs).
National Security Adviser Mallam Nuhu Ribadu acknowledges inheriting a "bankrupt country," with public debt soaring to N87 trillion in Q2 2023. The abuse of Ways and Means, amendments to increase the debt limit, and the proposed N26.01 trillion 2024 budget with significant debt servicing costs contribute to the fiscal challenges.
Crude oil swap deals, mismanagement, and corruption further exacerbate Nigeria's forex dilemma. The NNPC's inability to meet OPEC quotas, coupled with the abuse of forex for debt servicing, compounds the issue. The country's forex shortage is attributed to extravagant government spending, corruption, and a failure to accurately account for oil sales.
Experts highlight the need for a change in mindset, advocating for reduced reliance on foreign-made goods, de-dollarization, and increased local production. Calls for government intervention to address hoarding and a more disciplined approach to rebuild forex reserves are prominent.
While the CBN Governor notes recent improvements in forex liquidity, the road to recovery remains challenging. This in-depth analysis explores the multifaceted reasons behind Nigeria's persistent forex crisis, shedding light on its profound impact on the economy and potential paths towards a solution
Source: Daily Trust
