An investigation into the use of the US dollar and other foreign currencies as legal tender for domestic transactions in Nigeria is currently in progress, as instructed by the House of Representatives to the Banking Regulation Committee on Tuesday.
The House of Representatives has also put forth a request for the Central Bank of Nigeria to take measures to combat the declining value of the Naira in comparison to the dollar and other currencies.
The House has urged the CBN to adjust its monetary policy in order to stabilize the Naira, mitigate speculative activity in the foreign exchange market, and elevate the Naira’s withdrawal limit to ease the demand for the dollar and other foreign currencies.
The House also made an appeal to the Federal Government to initiate structural reforms and measures to combat corruption and propel the diversification of the national economy.
Additionally, the House called upon the Federal Government to increase foreign investors’ confidence in its fiscal and monetary policies as part of its efforts to promote exports and reduce imports.
It mandated the National Security and Intelligence Committee and the Committee on Banking Regulations to establish communication with the Nigerian Central Bank in order to commence compliance efforts.
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These resolutions were ratified after the motion put forth by Hon. Ismaila Dabo was given the green light.
The House of Representatives has recalled that in June 2023, President Bola Tinubu vowed to bring about reforms in the foreign exchange market.
As per the statement, this step was taken to establish market rates as the standard for buying and selling foreign currencies, rather than relying on rates set by the CBN.
It further noted that the President aimed to allow market forces to dictate the Naira’s value, but the alarming exchange rate had significant repercussions on Nigeria’s economy, leading to increased demand for dollars and a shortage of them.
As indicated by the House, around 90% of Nigeria’s total export revenue is derived from oil, making it the linchpin of the nation’s economy. Nonetheless, variations in the global oil price have a profound impact on the domestic foreign exchange market.
According to the House, this is the primary factor behind the Naira’s consistent decline in value.
The House mentioned that, despite the June unification, foreign exchange inflows in Nigeria have been slow, mainly due to the heightened demand for foreign currency and limited access to official markets, which has pushed transactions towards the unofficial market.
According to the House, the Naira’s value has deteriorated considerably in relation to the dollar, sliding from N778.602/$ in September 2023 to approximately N1000/$ on the black market.
The House highlighted that this is the initial effort by Nigeria to liberalize the foreign exchange market.
The motion reads, ‘The House is worried about inflation and the cost of living; depreciating naira makes imported goods more expensive, leading to higher inflation rates. This increased cost of living disproportionately affects the most vulnerable citizens, as they struggle to afford basic necessities, which are now glaring across the country.’
‘The House is also worried about the reduction in investment, as the value of the naira continues to lose value and depreciates against the dollar and other foreign currencies, foreign investors may be deterred from investing in Nigeria, fearing potential currency losses, which is capable of stunting economic growth and hindering the creation of new job opportunities for unemployed Nigerian youth.’
‘The House is aware that a weaker and depreciating Naira could increase Nigeria’s external debt servicing costs, potentially reducing government spending on critical sectors like healthcare and education.’
‘The House is also aware that the Central Bank of Nigeria frequently uses its foreign reserves to stabilise the naira, but this can deplete its reserves, making the country vulnerable to economic shocks.’
‘The House is cognizant that addressing Nigeria’s financial challenges requires collective responsibility from all stakeholders, including Parliament, which has been the voice of the common man,’ it said.