Reps call on the CBN to alter its monetary policy in order to stabilize the naira.

 

The House of Representatives has issued a recommendation to the Central Bank of Nigeria (CBN) to enact monetary policy modifications in order to achieve currency stability.

The demand was made following the unanimous adoption of a motion by Representative Ismaila Dabo (APC-Bauchi state) during a plenary session held in Abuja on Tuesday.

During the session, Dabo brought up the fact that in June 2023, President Bola Tinubu made an announcement regarding modifications to the foreign exchange market of the country, which were implemented through the Central Bank of Nigeria (CBN).

The individual provided an explanation that the changes entailed the adoption of a market-based system for the buying and selling of foreign currencies, wherein exchange rates would be established by market forces rather than being set by the central bank.

As per his statement, the objective of the modification is to enable market forces to ascertain the value of the Nigerian currency, the naira. However, the concerning exchange rate has had a significant impact on the Nigerian economy, resulting in considerable hardships due to heightened demand for the US dollar and a scarcity of such currency.

According to the representative, around 90% of Nigeria's overall export profits are derived from the oil sector, which serves as the primary pillar of the nation's economy.

According to his statement, fluctuations in global oil prices significantly influence the foreign exchange market of the country, hence providing an explanation for the ongoing depreciation of the Naira.

According to Dabo, notwithstanding the unification that took place in June, Nigeria's foreign exchange inflows are experiencing a delay.

According to his statement, the situation has led to an increased demand for foreign currency and restricted availability in official marketplaces, hence encouraging transactions in the black market.

Consequently, the Naira has experienced a significant depreciation in relation to the US dollar, declining from a rate of N778.602 per dollar on September 26, 2023, to approximately N1000 per dollar in the parallel market. This development marks the initial instance in which Nigeria has implemented liberalization measures inside its foreign exchange market.

The depreciation of the Naira, coupled with inflation and rising costs of living, results in increased prices of imported products, hence contributing to elevated inflation rates. This situation is a cause for concern.

According to the speaker, the heightened cost of living has a disproportionate impact on the most disadvantaged members of society, who have difficulties in affording essential goods and services, a situation that is evident nationwide.

The legislator voiced concern on the decline in investment, attributed to the devaluation and depreciation of the Naira against the US dollar and other international currencies.

According to his statement, the possibility of currency losses in Nigeria has the ability to discourage foreign investors, so impeding economic growth and limiting the generation of employment possibilities for unemployed Nigerian young.

The probable depreciation of the Nigerian currency, the naira, may result in increased costs for servicing the country's external debt. This, in turn, could lead to a reduction in government expenditure on vital areas such as healthcare and education.

The Central Bank of Nigeria (CBN) often utilizes its foreign reserves in order to maintain stability in the value of the national currency, the naira. However, this practice can lead to a reduction in the reserves, so exposing the country to potential economic disruptions.

According to the speaker, the resolution of Nigeria's financial difficulties necessitates a shared obligation among all relevant parties, including the parliament, which has traditionally represented the interests of the general populace.

The legislative body expressed its recommendation to the Central Bank of Nigeria (CBN) to tackle speculative activity within the foreign exchange market, while also advocating for an increase in the withdrawal limit of the national currency (Naira). This proposed measure aims to alleviate the strain on the availability of dollars and other foreign currencies.

The legislators additionally call upon the Federal Government to develop policies and implement structural reforms aimed at mitigating corruption and fostering economic diversification within the national economy.

The proponents emphasized the importance of the Federal Government's role in stimulating export activities and curbing imports through measures aimed at bolstering foreign investors' trust in its fiscal and monetary policies.

The Deputy Speaker of the House, Representative Benjamin Kalu, has directed the Committees on Banking Regulations and National Security and Intelligence to engage with the central bank and develop methods for ensuring compliance.

Additionally, he issued a mandate to the Committee on Banking Regulation to conduct an investigation into the utilization of United States dollars and other foreign currencies as acceptable forms of legal tender for domestic transactions within Nigeria.