Nigeria's new forex plan aims for $200 billion in inflows

              Nigeria's new forex plan aims for $200 billion in inflows

Nigeria's central bank has devised a new strategy to entice $200 billion in foreign direct investment into the continent's largest economy: make it more appealing for exporters to bring home foreign money.

The Nigerian Central Bank will no longer sell dollars to local banks, instead of requiring institutions to seek foreign currency on their own. The regulator would provide export-oriented producers with low-cost long-term loans and try to persuade exporters to repatriate dollar proceeds and deposit them with banks.

Nigeria's central bank has struggled to increase dollar supplies and has frequently changed restrictions in the process. The most significant shift since it ceased supplying foreign cash to money changers will be the latest proposal. The regulator expects the measures to boost foreign-exchange supplies in the next three to five years after the currency was devalued three times since 2020 due to a drop in crude oil prices, which hurt inflows.

In an emailed answer to inquiries, Yvonne Mhango, Africa economist at Renaissance Capital, stated, "I'm not sure why banks will be more effective at convincing exporters to repatriate their gains to Nigeria than the central bank." "Without any guarantee that we will see an uptick in the repatriation of proceeds if the central bank stops supplying banks," he warned, the naira might plummet.

According to Emefiele, the regulator established an export support facility that will provide producers with financing for up to ten years with a two-year moratorium and a 5% interest rate. He also stated that the central bank will extend by a year a Covid-19 interest rate benefit that began in 2020 to assist producers.

Dollar Deficit

The central bank intends to make it more appealing for exporters to buy local currency and bring their revenues back home.

The 27 percent difference between the official and parallel market exchange rates of the naira has so far deterred businesses from repatriating foreign currency to Nigeria.

"We can truly protect the long-term worth of our currency, as well as the stability of our exchange rate, only by strengthening this economy's productive and earning capability," Emefiele added.

By 4:30 p.m. in Lagos, Nigeria's commercial metropolis, the official spot rate had fallen 0.1 percent to 416.71 naira to the dollar.

In July, the central bank accused money changers of exacerbating a dollar shortage and restricted deliveries to them, depriving the market of over $6 billion in supply every year. In September, it issued an order requiring lenders to identify consumers who purchase foreign exchange using forged documents and publish their names in order to prevent dollar arbitrage.