Emmanuel OchayiPraise Ihensekhien, a financial expert at Meristem Securities Limited, has suggested that the Nigerian government should consider adopting alternative currencies for import transactions to alleviate the FX crisis and stabilize the Naira.
During an Economy Outlook webinar, Ihensekhien emphasized the importance of reducing reliance on the US dollar (USD) to ease pressure on the Naira in the foreign exchange market.
“If we implement policies to transact imports in currencies other than USD, it would lessen the demand for the greenback,” Ihensekhien stated. She commended the Central Bank of Nigeria (CBN) for its efforts in stabilizing the Naira but urged for further action to bolster supply.
“The CBN still needs substantial Dollar inflow to the FX market,” she remarked. Ihensekhien proposed exploring multilateral lending arrangements with other central banks to secure concessional facilities, potentially resulting in significant Dollar inflows.
“The CBN can engage in bilateral agreements with other central banks to facilitate substantial Dollar inflows. A $10 billion inflow with a long-term agreement would be highly beneficial,” she explained.
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While acknowledging the recent positive market response to CBN’s measures, Ihensekhien cautioned that sustaining the Naira’s bullish run might require increased FX market supply in the long term.
Under the leadership of Yemi Cardoso, the CBN has implemented over fifty circulars aimed at reforming the FX market and ensuring currency stability. This has led to a significant strengthening of the Naira, with a 21.8% increase in March 2024, the highest in five years.
According to Nairametrics’ daily FX watch, the Naira has continued to appreciate against the Dollar, settling around N1255/$ based on the latest market report.
However, some experts express concerns about the sustainability of the Naira’s recent gains without a corresponding increase in FX market supply over time.
In response to Ihensekhien’s suggestions, analysts are calling for a broader discussion on diversifying import transactions and exploring avenues for increased Dollar inflow to stabilize the Naira and address the ongoing FX crisis.
The Nigerian government faces the challenge of balancing the need for currency stability with the imperative to attract foreign investment and ensure sustainable economic growth. As discussions continue, stakeholders are hopeful for pragmatic solutions to navigate the complexities of the FX crisis and bolster the nation’s economic resilience.
