The World Bank has recommended a single foreign exchange (Forex) market, urging Nigeria to do away with its multiple forex markets.
In its latest ‘Macro Poverty Outlook for Nigeria: April 2023’, the World Bank said unification of the forex markets should be one of the reforms to strengthen the recovery of the country’s economy.
According to the global financial institution, the foreign exchange reform will restore macroeconomic stability which the bank said has weakened due to exchange rate distortions.
Although, the World Bank also cited declining oil production, costly fuel subsidies, and monetization of the fiscal deficit as reasons for weak macroeconomics.
“Macroeconomic stability has weakened amidst declining oil production, costly fuel subsidies, exchange rate distortions, and monetization of the fiscal deficit.
“The authorities can strengthen the economy by restoring macroeconomic stability through reforms to increase oil and non-oil revenues, tighten monetary policies to reduce inflation and unify the multiple FX windows and adopt a single, market-responsive exchange rate,” the report said.
The World Bank’s advice is in line with the plan of the President-elect, Bola Tinubu, who has also spoken in favour of foreign exchange reform.
While the victory of Tinubu in the February 2023 presidential election is still being contested by his political opponents, Peter Obi and Atiku Abubakar, his administration is set to take over on May 29, 2023.
Tinubu, during his campaign, said he would harmonize the fiscal and monetary policy to achieve immediate stabilisation of the value of the naira against the US dollar.
The President-elect said he would work with the Central Bank of Nigeria (CBN) to bring down the exchange rate to N200 in his first term.
“My administration will collaborate with the Central Bank to harmonize the fiscal and monetary policy to achieve immediate stabilization of the value of the naira against the US dollars and other currencies and in the short term, strengthen the naira by boosting the supply of foreign currency and moderating demand.
“The short-term goal is to achieve a naira/dollar rate of 300 naira/US$ and gradually achieve a less than 200 naira rate over the next four years,” Tinubu stated.