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Wednesday, February 21, 2024

Nigeria to Get Inflow of $10 Billion, Ban Parallel Market

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Nigeria expects to receive $10 billion of inflows in the coming weeks that will help ease a liquidity crunch weighing on the naira.

The government has a “line of sight” on the inflows into the country “in weeks rather than months,” Finance Minister Wale Edun said at the Nigerian Economic Summit in the capital, Abuja, on Monday. He didn’t give details.

President Bola Tinubu’s government has been struggling to stem the decline in the currency. The inflows will add to other steps being taken by the government to boost foreign-exchange liquidity, including improving market transparency and allowing domestic entities to issue foreign-exchange instruments, Edun said.

“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.”

The authorities also plan to broaden 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 conference.

Nigeria is considering making it illegal to trade in the parallel market, Oyedele said.

“We currently have a market that is not working and it’s not going to work in its current format,” he said. “We don’t have sufficient liquidity even if you combine the parallel and the official markets.”

The naira slid about 4% to 1,215 a dollar on Monday amid insatiable demand for the greenback on the streets. The decline came days after the central bank ended curbs on using dollars to buy dozens of imported items, and at a time of the year that typically sees Nigerians making payments for tuition at foreign schools and universities.

Further details elaborating on the specifics of these “far-ranging initiatives to deepen foreign-exchange liquidity and improve confidence across” will be shared by the finance minister and the central bank governor, Tinubu said at the conference.

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