As Tinubu Eyes a N200/Dollar Rate, The World Bank Is Offering Forex Rate Advice to Nigeria
The World Bank has advised Nigeria to abandon its several foreign exchange (Forex) exchanges in favor of a single Forex market.
The World Bank recommended that one of the reforms to support the nation’s economy’s recovery be the unification of the FX markets in its most recent report, “Macro Poverty Outlook for Nigeria: April 2023.”
The international financial organization claims that the reform of foreign exchange will strengthen macroeconomic stability, which has eroded as a result of exchange rate distortions.
However, the World Bank also identified monetizing the fiscal deficit, expensive fuel subsidies, and diminishing oil production as causes for weak macroeconomics.
Amid falling oil production, expensive fuel subsidies, exchange rate distortions, and monetization of the fiscal deficit, macroeconomic stability has deteriorated.
“The authorities can strengthen the economy by restoring macroeconomic stability through reforms to increase oil and non-oil revenues, tighten monetary policies to reduce inflation, and unify the multiple FX windows and adopt a single, market-responsive exchange rate,” according to the paper.
The World Bank’s recommendations are in line with Bola Tinubu’s proposal, who is also in favor of reforming the foreign currency system.
While Peter Obi and Atiku Abubakar, Tinubu’s political rivals, are still contesting his victory in the February 2023 presidential election, his administration is scheduled to enter office on May 29, 2023.
In order to immediately stabilize the value of the naira versus the US dollar, Tinubu promised to align fiscal and monetary policy during his campaign.
During his first term, the President-elect promised to cooperate with the CBN to lower the exchange rate to N200.
“My administration will work with the Central Bank to align fiscal and monetary policy in order to achieve immediate stabilization of the naira’s value against the US dollar and other currencies. In the short term, this will strengthen the naira by increasing the supply of foreign currency and reducing demand.
“The short-term goal is to achieve a naira/dollar rate of 300 naira/US$ and gradually achieve a naira/dollar rate of less than 200 naira over the next four years,” Tinubu said.
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