The use of the US dollar and other foreign currencies as legal tender for domestic transactions in Nigeria is under probe, according to a Tuesday order from the House of Representatives sent to the Committee on Banking Regulation.
The House of Representatives also encouraged the Central Bank of Nigeria to address the Naira’s decreasing value against the dollar and other currencies.
The House asked the CBN to reform monetary policy in order to stabilise the naira, address speculative behaviour in the foreign exchange market, and raise the naira’s withdrawal limit in order to relieve pressure on dollars and other foreign currencies.
It also requested that the Federal Government implement structural adjustments and measures to combat corruption and boost the diversification of the nation’s economy.
The House additionally asked the Federal Government to increase foreign investors’ confidence in its fiscal and monetary policies to stimulate exporting and decrease importing.
It instructed the National Security and Intelligence Committee and the Committee on Banking Regulations to communicate with the Nigerian Central Bank to launch compliance efforts.
These resolutions were passed when the Hon. Ismaila Dabo’s motion was approved.
You may recall that President Bola Tinubu promised reforms to the nation’s foreign exchange market in June 2023, according to the House of Representatives.
This, it said, was done so that market rates, rather than those set by the CBN, would henceforth be used to buy and sell foreign currencies.
It also mentioned that the President intended to let market forces determine the value of the naira, but that the frightening exchange rate has had an impact on Nigeria’s economy and caused great suffering owing to a rise in demand for dollars and a lack of dollars.
According to the House, oil accounts for roughly 90% of Nigeria’s total export revenue, which is the backbone of the nation’s economy. However, variations in the global price of oil have a significant influence on the local foreign exchange market.
This, according to the House, explains why the naira has kept losing value.
The House said that despite unification in June, Nigeria’s foreign exchange inflows have lagged, with high demand for foreign currency and restricted access to official markets encouraging purchases on the illegal market.
According to the House, the naira has lost a larger percentage of value relative to the dollar, from N778.602/$ in September 2023 to around N1000/$ on the black market.
According to the House, this is Nigeria’s first time liberalising the foreign exchange market.
The motion reads, “The House is worried about inflation and the cost of living; depreciating naira makes imported goods more expensive, leading to higher inflation rates. This increased cost of living disproportionately affects the most vulnerable citizens, as they struggle to afford basic necessities, which are now glaring across the country.
“The House is also worried about the reduction in investment, as the value of the naira continues to lose value and depreciates against the dollar and other foreign currencies, foreign investors may be deterred from investing in Nigeria, fearing potential currency losses, which is capable of stunting economic growth and hindering the creation of new job opportunities for unemployed Nigerian youth.
“The House is aware that a weaker and depreciating Naira could increase Nigeria’s external debt servicing costs, potentially reducing government spending on critical sectors like healthcare and education.
“The House is also aware that the Central Bank of Nigeria frequently uses its foreign reserves to stabilise the naira, but this can deplete its reserves, making the country vulnerable to economic shocks.
“The House is cognizant that addressing Nigeria’s financial challenges requires collective responsibility from all stakeholders, including Parliament, which has been the voice of the common man,” it said.