The Institute of Chartered Accountants of Nigeria (ICAN) has commended the President Bola Tinubu’s led government for floating the exchange, but warned it will not be a magical solution to solving the country’s complicated problems.
Innocent Okwuosa, the 59th President of ICAN in his speech recently at a press conference held at the institute’s secretariat office, Plot 16, Idowu Taylor Street, Victoria Island-Lagos said that the government should minimise the negative short-term impacts in order to realise the long-term benefits.
Okwuosa highlighted key implications of the unification on the Nigerian businesses and economy such as being a catalyst for investment flows into the country.
“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.
Foreign portfolio investors are expected in the near term whilst foreign direct investors that require more investment appraisal time will come in subsequently,” he said.
In addition, he said: “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.
Government’s revenue will increase in naira terms resulting in higher revenue to GDP ratio among others.”
Okwuosa pointed out that all presidential candidates prior to the 2023 national election promised the unification of the foreign exchange rate as a primary economic policy, but lacked the political will to implement the policy.
He commended President Tinubu for being able to carry out this promise on June 14, less than three weeks into office.
The ICAN’s 59th president counseled the government to bear in mind that there are financial considerations that are accrued with the unification.
He maintained that with the unification of the exchange rate, the service cost of the government’s external debt which is denominated in foreign currency is $42 billion will increase by N12 trillion.
“The total debt to gross domestic product ratio will also increase by 5 percent due to the total debt rising to N90 trillion.
On the other hand, there should be some cost savings as the government discontinues the various foreign exchange interventions that are, Naira4Dollar, and RT200 among others. which cost tens of billions of naira. Finally, the national budget will need to be evaluated with the new foreign exchange rate,” he noted.
The graduate of Henley Business School and the University of Reading revealed that the likely effect of floating of the exchange rate is a possible reduction in budget deficit if the government’s foreign exchange revenue exceeds foreign exchange obligations.
“This new policy is applauded by the Institute of Chartered Accountants Nigeria. It is expected that this action will generally lead to short-term pains that will yield long-term gains,” he said.
ICAN urged the federal government to ensure that the desired objective of this policy is achieved and there is growth in the Nigerian economy.
And to achieve this, the institute advocated for a timely appointment of a new Central Bank of Nigeria governor who will provide a credible long-term direction for this policy.
Moreover, it demanded the government review the prohibited list of goods to ensure demand is not segmented.
And amend certain tax laws that require taxes to be paid in foreign currency thereby creating artificial demand for foreign exchange, among others.
He assured the federal government of ICAN’s readiness and willingness to offer its support in the efforts to move the country forward.