FX unification, a crucial step to addressing economic challenges – Goott

Trevor Goott, the Unlimit Director for Africa, has said the recent decision by the Central Bank of Nigeria to float the naira and unify all exchange rates into the Importers and Exporters (I&E) window marks a pivotal moment in the country’s economic history.

This move, aimed at addressing the USD cash shortage and eliminating the currency premium, he said is expected to have far-reaching and positive implications for Nigeria’s economy.

Goott, in a statement, applauded the recent decision by the Central Bank of Nigeria to unify the exchange rate.

He also shed light on the significance of this decision and its potential impact on various sectors.

Trevor described the Nigerian government’s decision as a crucial step in addressing the struggle faced by the country due to the shortage of US dollars needed for importing goods and services.

“The country has felt the struggle of a USD cash shortage needed to pay for imported goods and services. Due to these shortages, the Nigerian Naira (‘NGN’) should have become cheaper or depreciated to the dollar. Instead, the government set its own official rate.

“Unfortunately, there were no dollars available on demand at this rate and as a result, a parallel market opened up where people could source dollars at approximately NGN750 per USD — a 62 percent premium. That was the price for liquidity and dollar availability, and an indication of where the true equilibrium between demand and supply should have been,” he said.

Commenting on the far-reaching impacts of the old model, Goott highlighted its adverse impacts on Foreign Direct Investment (FDI). “The old model — and it feels great to say that — was a major blocker to doing business in Nigeria.” According to him, this was especially because “the problems of access to the official rate — NGN463 per USD — were numerous. Appointments had to be booked in advance, a lot of paperwork was required, and the final decision would come weeks or even months later” he said.

With this new economic policy, Goott emphasised the long-term benefits of the exchange rate unification, particularly for Nigeria’s thriving startup scene.

“Nigeria has a thriving and exciting startup scene. Following this announcement, I expect to see more interests from foreign investors who will be updating their FX assumptions in their investment models and discover that more Nigerian businesses have now crossed the threshold from uninvestable to investable.

“The door of opportunity has opened — Africa’s largest economy has just opened itself up for business, and the positive economic consequences for Nigeria will be evident for years to come,” he added.