President Bola Ahmed Tinubu’s reasoning for floating the naira has been made public by the Presidency.
According to the statement, the decision was made because the Central Bank of Nigeria (CBN) was maintaining the value of the naira at the official rate by spending almost $1.5 billion each month.
This was revealed in a recent interview with Arise News by Bayo Onanuga, the President’s Special Advisor on Information and Strategy.
According to Onanuga, some connected to Godwin Emefiele, the previous governor of the Central Bank of Nigeria, and others close to some members of Muhammadu Buhari’s administration allegedly collected money at the official rate and sold it on the black market.
“Under the previous administration (of the CBN), as per media reports, the CBN was spending roughly $1.5 billion every year,” he stated.
In this case, individuals close to the former governor and other government figures were receiving payments at the official rate. They then engaged in arbitrage, or the sale of the funds obtained through roundtripping and selling them on the black market, where they profited handsomely for doing nothing. The government attempted to prevent some of these things.
Onanuga added that foreign direct investment (FDI) had eventually “dried up” because investors were unwilling to make investments in an area where there was unstable currency rates because of the gap in the official window and the parallel market.
According to the presidential adviser, market prices for goods and commodities were rising faster than they ought to.
“Some of the price increases we are seeing are extremely phony; it seems like everyone is just raising prices,” he stated. Because even if you want to dollarize your economy, you actually can’t tolerate the kind of extremely sharp price increases that this nation is currently experiencing if you line it with the exchange rate.
Onanuga went on to say that although more money had been allocated to the lower levels of government, there had been no progress in the last few months, so more complaints and queries should be addressed to state and local government councils rather than the federal government.
“I’m sure the naira will begin to wax stronger and stronger and probably go to the rate that Governor Cardoso envisages it will be instead of the rate we have now if we can sustain the stability we have now if we can ensure that we don’t have the volatility anymore,” he continued.