Tinubu’s hastily assembled, unplanned FX strategy

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Atiku Abubakar, the Peoples Democratic Party’s presidential contender for 2023, claimed that President Bola Tinubu’s economic policies—especially the unification of the currency rate—were hurriedly put into action without sufficient planning or stakeholder input.

Nigerians are currently battling economic difficulties brought on by federal government policies.

It has become difficult for many residents to afford necessities as a result of these issues.

In a statement released on Sunday, the former vice president said that he was aware that the nation’s economy was in serious trouble towards the end of former President Muhammadu Buhari’s term.

Atiku chastised Tinubu for failing to adequately outline the policies his administration was implementing to deal with the country’s ongoing economic crises.

“Bola Tinubu failed, yet again, to showcase any concrete policy steps that his administration is taking to contain the crises of currency fluctuation and poverty that face the country,” the statement reads. “The meeting was called at his instance on Thursday to address the problem of economic downturn and the foreign exchange crisis, among others.

Instead, he informed the nation and the experts who have been putting up suggestions for how to end the problem that he and his group shouldn’t be sidetracked and should be given more time to continue crafting the concoction that has caused the people of Nigeria immeasurable suffering.

The opposition leader, Atiku, asserted that “the rest of us cannot keep quiet when the government has demonstrated sufficient poverty of ideas to redeem the situation.” He said, “The wrong policies of the Tinubu administration continue to cause untold pain and distress on the economy.”

“There are ways that the country can walk out of the current crisis,” he said, challenging the government’s habitual hubris.

“I knew full well that the country’s economy was heading for the ditch after a careful assessment of its state at the end of the previous administration, and I came up with a number of policy prescriptions that would rescue the country from getting into the mess that we are currently in.”

In the statement, Atiku recalled that he had promised to overhaul the foreign exchange system by doing away with several exchange rate windows, which benefited only opportunists, intermediaries, and fraudsters, in his 2023 presidential election policy document, “My Covenant With Nigerians.”

“A fixed exchange rate system would be out of the question,” the statement continued. First of all, it would go against our policy of maintaining an open economy that is supportive of the private sector. Second, having enough foreign exchange reserves to protect the home currency at all times would be necessary to run a successful fixed-exchange rate regime. However, as everyone knows, Nigeria’s biggest problem is the ongoing foreign exchange illiquidity brought on by the nation’s small inflow of foreign exchange. Insufficient foreign exchange reserves will result in low trust in the Nigerian economy and further pressure on the Naira. The economy won’t have enough strength to sustain its value. Plus, having a fixed exchange rate system is like having a government subsidy program!

However, implementing a floating currency rate system would be excessive given Nigeria’s fundamental economic circumstances. We would have urged the Nigerian Central Bank to handle foreign exchange by taking a gradualist approach. The better choice would have been a managed-floating system. To put it simply, under such a system, the value of the Naira may vary on a daily basis, but the CBN will intervene to regulate and stabilize it. Such regulation will be applied sensibly and carefully, particularly in relation to curtailing speculative activities.

“Nigeria has insufficient, unstable, and precarious foreign reserves to support a free-floating rate regime,” he added, explaining why the legislation is necessary. During times of crisis, Nigeria’s reserves lacked sufficient foreign exchange to be freely sold at fair market prices. Nigeria’s diminishing oil production means that the country does not receive enough US dollars from the sale of its crude oil. Furthermore, Nigeria is not drawing a significant amount of foreign investment.

“These are sufficient reasons for Nigeria to pursue a more dominant position in the market, particularly in the near to medium term when convergence is anticipated to occur,” the statement continued.

“Tinubu’s new FX management policy was hastily built without adequate planning or stakeholder input. The government’s actions had actual and potential harmful effects that it either failed to foresee or minimized.

“The CBN was not given the independence to create and carry out a sound FX Management Policy that would have addressed issues like raising liquidity, reducing or controlling demand, handling FX backlogs, and rate convergence by the government.”

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