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Nigeria begins probe into FX racketeering
The Nigerian government says it is investigating the $2.4 billion foreign exchange allocations and forward contracts which the Central Bank of Nigeria flagged as ineligible. Tilewa Adebajo, the CEO of CFG Advisory, joins CNBC Africa for this discussion.
Wed, 27 Mar 2024 11:41:20 GMT
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AI Generated Summary
- Central Bank rate increase signals positive real rates and attracts foreign investments
- Focus on reducing inflation crucial for restoring purchasing power and market stability
- Transparency and accountability essential in FX probe to address legacy issues and ensure fair exchange rates
The Nigerian government has initiated a probe into the $2.4 billion foreign exchange allocations and forward contracts flagged as ineligible by the Central Bank of Nigeria. Tilewa Adebajo, the Chief Executive Officer of CFG Advisory, joined CNBC Africa to provide insights into the current economic landscape in Nigeria. Adebajo commended the recent rate increase by the Central Bank, moving from 18.75 to 25 percent, signaling positive real rates and alignment between monetary and fiscal policies. This move has already attracted significant foreign portfolio investments, with a potential inflow of up to $12 billion in 2020. The goal is to achieve stability in the market and reverse the distortions caused by inflation.
Furthermore, Adebajo highlighted the importance of reducing inflation to restore purchasing power, especially for the millions living in poverty in Nigeria. He explained that the impact of the rate increase may not be immediately evident but expects stability to be achieved by the first quarter of the following year. A focus on foreign exchange stability and fiscal responsibility is crucial, as higher interest rates will affect the government's debt servicing costs.
In response to the FX racketeering probe, Adebajo emphasized the need to follow due process and provide valid documentation to support claims. He acknowledged that there were legacy issues that needed to be addressed and urged transparency in the reconciliation process. Regarding the Naira's gradual appreciation, Adebajo expressed concern over the arbitrary devaluation in the past, attributing it to banks reversing their net open positions. He called for accountability and cautioned against undue profiteering in the foreign exchange market.
Looking ahead, Adebajo hopes for continued stability in the FX market and anticipates further reforms to enhance transparency and efficiency. He underscored the importance of a willing buyer-willing seller model to deter speculators and ensure a fair and balanced exchange rate system. As Nigeria navigates economic challenges and works towards sustainable growth, collaboration between government institutions and market participants will be essential in achieving long-term stability and prosperity.
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