Naira vs Dollar: Experts propose what CBN, FG must do to strengthen Nigeria's currency

Financial and capital market experts in Nigeria have proposed several strategies for the government to attract more foreign exchange and strengthen the naira.

The experts gave their remarks during the 2024 edition of the Vanguard Economic Discourse held in Lagos.

Troubling naira rate

Since late 2023, the Nigerian naira has experienced a significant decline, plummeting to a historic low of approximately N1900 to the dollar by February 2024.

However, on the first trading day of June, the naira showed strength against the US dollar in both official and unofficial foreign exchange markets.

According to new data from FMDQ Securities, the naira appreciated to N1,476.12 per dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEM) on Monday, June 3.

Under Governor Yemi Cardoso's leadership, the Central Bank of Nigeria has implemented several policies to stabilise the declining naira.

However, these measures have not been as successful in boosting the naira's value as many Nigerians had hoped.

Increase forex earnings

The fluctuating foreign exchange rate has significantly affected the prices of goods and services in Nigeria, raising widespread concerns.

Bismarck Rewane, MD/CEO of Financial Derivatives, emphasised that while reforms are essential for an efficient forex market, the country must also increase its dollar earnings to achieve any substantial appreciation of the naira.

He said:

“If there is no supply, you can have the best structure in the world, the currency wouldn’t appreciate. If there is supply, because you earn the money from oil, from invisible services and all of that, you should earn that. So, currency would appreciate."

According to Vanguard, Rewane noted that the central bank cannot print dollars, even if it wants to. Instead, it must focus on earning dollars and maintaining an efficient and transparent market.

He emphasised the need for improved communication between operators, policymakers, and regulators, as the CBN's interventions to defend the naira are only temporary measures.

Attract foreign investment

Dele Oye, the President of the Nigeria Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), urged the CBN to align with global practices in defending the naira.

Oye suggested prioritising bold, pro-business reforms that create a favourable investment climate, thereby boosting dollar inflows through increased foreign investment.

He said:

“What the country needs is significant foreign exchange inflow in the short time and there are two options to achieving this.

"The first option is borrowing but this is less desirable because it will lead to an increased debt burden. The second option is to attract foreign investment, and this is more sustainable."

He emphasized that to secure sustainable foreign investment, both in the short and long term, the government needs to implement bold pro-business reforms to foster a conducive investment environment.

He added that these reforms should include improving trade infrastructure, reducing tariffs, liberalizing key economic sectors, and streamlining regulatory processes.