Citigroup has called for the removal of foreign exchange restrictions on 43 items imposed by the Central Bank of Nigeria (CBN) as a critical step to address the challenges faced by Nigeria’s forex market.
This appeal comes from insights shared in the CEEMEA Frontier Credit Market Commentary, authored by credit analyst Ayso van Eysinga, following his visit to Nigeria.
Van Eysinga highlighted the urgency of addressing the backlog of forex demand, particularly the past-due forwards of approximately $6.8 billion, which local banks had taken over from local corporates, straining the banking system and hampering the issuance of new letters of credit.
He suggested that the CBN may not necessarily need to source $6.8 billion in fresh dollars but rather consider a partial repayment and restructuring of the balance.
To achieve a more streamlined forex market, Van Eysinga emphasized the necessity of eliminating regulations contributing to the tiered FX system, with the most glaring being the restrictions placed on 43 specific items as published in a CBN circular in June 2015.
In addition to addressing forex challenges, the report discussed the imperative to boost oil production. It acknowledged the scale of oil theft, involving hundreds of thousands of barrels per day, and the challenges in combating such organized criminal activities.
The report argued that ramping up oil production beyond 1.5 million barrels per day in the medium term would be essential for a stronger Naira and price stability.
Tunde Amolegbe, Managing Director of Arthur Steven Asset Management Limited, expressed concerns about the report’s prediction of the government’s struggle to raise crude oil production due to powerful unseen forces.
He stressed the need for innovative solutions to reduce systemic liquidity and establish a clear correlation between monetary policy and its impact on inflation.
While the report recognized the strength of Nigeria’s current leadership team, including President Bola Tinubu, Finance Minister Wale Edun, and Central Bank Governor Yemi Cardoso, it called for a strategic effort to rectify past administration’s policies and rebuild economic credibility.
The recommendations from Citigroup underscore the importance of regulatory reforms and increased oil production to revive Nigeria’s forex market and overall economic stability.