October 4, 2022
Nigeria’s quest for rapid economic growth and increased foreign exchange inflows is tied to the implementation of foreign exchange reforms to restore investors’ confidence in the economy.
Speaking at the Global Research Briefing of the Standard Chartered Bank held in Lagos, head of the bank’s Research, Africa and Middle East, Razia Khan, who stated this also said that while removal of petrol subsidy is also critical to unlocking the nation’s economic potentials, foreign exchange reforms are the most urgent especially in the face of global economic headwinds which makes it difficult for Nigeria and other emerging countries to access external borrowing as well as attract exchange inflows.
Khan noted that while there has been an element of foreign direct investor interest in Nigeria already, concerns around the forex regime have discouraged a longer term commitment from foreign investors.
“With respect to foreign portfolio inflows, nobody’s going to be investing at a time when there’s so much global market volatility and certainly not into a market that isn’t properly functional, or one in which investors know that they can put money in and get money out as well”, she said.
While allaying fears that forex reforms will lead to further increase in inflation, Khan said: “Inflation in Nigeria is currently being pressured because the parallel forex market determines pricing for many items consumed in Nigeria, so the sooner we see foreign exchange reforms prioritised, make the FX market functional, allow the Investors and Exporters ( I&E) window to have more price discovery”.
“We don’t believe looking at what we’ve seen in the past that this in itself is going to be that inflationary because anything that takes activity away from the parallel market and brings it back to official channels could actually lead to the smooth functioning of that market and reining in of potentially runaway inflationary pressures”.
