By Olusegun Obisanya
The Institute of Chartered Accountants of Nigeria (ICAN) has thrown its weight behind the unification of the foreign exchange rate as a primary economic policy.
The 59th President of Institute of Chartered Accountants of Nigeria, Dr. Innocent Okwuosa disclosed this in a statement, which he personally signed and obtained by The Impact newspaper.
The president, who highlighted the divergent challenges that faced the dual exchange rate policy in time past noted that the policy failed to achieve its lofty objectives and had various negative impacts on the Nigerian economy and businesses.
It would be recall that on 14 June 2023 (less than three weeks into the new administration), the Central Bank of Nigeria (CBN) abolished all market segmentation. Consequently, all market segments collapsed into the Investor and Exporters (I&E) window.
Recounting historical background of the dual exchange rate in Nigeria, Okwuosa noted, “In 2017, the CBN facilitated the dual exchange rate through the utilisation of the fixed exchange rate regime. In this case, the value of the Nigerian Naira was pegged against a basket of other countries’ currencies i.e., United States Dollar (USD), Great British Pound (GBP) and European Euro (EUR).
“However, inadequate liquidity at the official foreign exchange market led to a thriving parallel market which created opportunities for exchange rate arbitrage, sometimes up to 60% premium on the official rate.”
He observed that the Central Bank of Nigeria, in the couple of years back had introduced and implemented some far-reaching monetary policies to address the negative consequences of its foreign exchange strategy on the market. These include cessation of sale of foreign exchange to Bureau de change (BDC); RT200 Rebate programme unveiled by CBN in February 2022; Naira 4 Dollar scheme, an incentive that pays naira to senders and recipients of international money transfers, among others.
Noting that the unification of the Nigeria foreign exchange rate is still at its early stages of implementation, Okwuosa disclosed that such move has economic implications.
“It is expected that the unified exchange rate will serve as a catalyst for investment flows into the country which will boost our foreign exchange reserve, grow the economy, create employment, and improve the quality of life.
“The inflow of capital from foreign portfolio investors into the Nigerian Capital Market will help grow the market and allow companies to raise capital efficiently to finance their growth ambitions.”
He added, “Government’s revenue will increase in naira terms resulting in a higher tax/revenue to GDP ratio. Corporate tax collection may however decline as many businesses crystallize foreign exchange losses due to the higher exchange rate.”
Okwuosa, however, provided some recommendations to ensure that the desired objectives of the policy are achieved and the economy experienced growth.
“Timely appointment of a new CBN governor, who will provide a credible long-term direction for this policy. This will provide certainty and stability, and boost investor confidence to inflow capital into the country.
“Effective and consistent implementation of the policy will ensure that no uncertainty is created by the mode of implementation and there is constant communication with key stakeholders such as businesses and investors amongst others.
“Review the prohibited list of goods to ensure demand is not segmented. Review and amend certain tax laws that require taxes to be paid in foreign currency thereby creating artificial demand for foreign exchange.”
While urging government to minimize the negative short-term impacts in order to realise the long-term benefits, ICAN President disclosed that the institute was ready to offer its support to the government in the efforts to move the country forward.
