Stabilising the naira amid rising FX demand

The Nigerian government is under pressure from various sectors, including organized labor and the private sector, to address the depreciation of the naira, which is having a significant impact on the economy. In a recent interview on CNBC Africa, Kyari Bukar, CEO of Africa Operations at Inlaks, shared insights on the current FX situation and the measures being taken to stabilize the naira. One of the key strategies being discussed is the expected $10 billion inflow into the market, with $7 billion of that amount coming from securitizing LNG dividends. Bukar highlighted the importance of this move, noting that structuring the dividends over a period of time can have a positive impact on the market. Additionally, measures such as increased oil production and the AfriExim loan are also expected to contribute to the influx of foreign exchange. The conversation also touched on the issue of speculators in the market, with Bukar noting that recent fluctuations in the exchange rate have led to a rush by speculators to exit their positions. This trend, while initially causing panic in the market, could ultimately work in favor of the government's efforts to stabilize the naira. While the $10 billion inflow is expected to help clear the existing backlog of foreign exchange demand, there are concerns about how to address ongoing demand once the backlog is resolved. Bukar emphasized the need for consistency in inflows and highlighted the importance of medium to long-term measures to support the naira. In terms of immediate solutions, Bukar proposed digitizing and automating diaspora remittances and other non-cross-border transactions to increase transparency and encourage inflows into the official channels. By aligning remittance rates with market rates and improving visibility, he believes that the market can attract more realistic inflows. Looking ahead, Bukar stressed the importance of supporting local manufacturing to reduce the country's reliance on imports. He acknowledged concerns from manufacturers about competition from imported goods and suggested policy measures such as higher duty rates to support locally produced goods. He also called for a patriotic approach to promoting domestic products, starting with government leadership setting an example. In conclusion, addressing the depreciation of the naira requires a multi-faceted approach that includes short-term interventions to stabilize the market and long-term strategies to boost local production and reduce import dependence. With proactive measures and a collaborative effort between the government, private sector, and other stakeholders, the Nigerian economy can work towards achieving a more stable and sustainable foreign exchange market.