FG targets $60bn reserve to sustain N600 to dollar exchange rate

A policy document prepared for President Bola Tinubu indicates that Nigeria should target an exchange rate of between N500 and N600 to the dollar, which requires reserves of up to $60 billion and a doubling of exports to support growth ambitions, a policy document prepared for the government showed. But the Naira lost against the dollar at the Investors and Exporters window, exchanging N702.19 to the dollar. The local currency depreciated by 5.75 per cent when compared with N664.04 for which it exchanged for the dollar on Wednesday. 

The open indicative rate stood at N658.50 to the dollar. An exchange rate of N791 to the dollar was the highest rate recorded within the day’s trading before it settled at N702.19. The Naira sold for as low as N461 to the dollar within the day’s trading. A total of $70.72 million was traded at the official Investors and Exporters window on Thursday. President Bola Tinubu has moved swiftly to reform the economy since being sworn into office on May 29, scrapping a costly petrol subsidy and curbs on the foreign currency market, which saw the official rate of the Naira tumble to record lows. The report from Tinubu’s policy advisory council, seen by Reuters on Friday, proposes reforming the central bank, including a halt to its quasi-fiscal operations that accelerated under suspended governor Godwin Emefiele. Tinubu’s spokesman, Dele Alake, did not immediately respond to telephone calls and messages to seek comment.

About $50 billion to $60 billion in reserves and monthly inflows of up to $8 billion in export earnings and other capital inflows “will be required to support the policy at an exchange rate of 500 to 600 naira to the dollar,” the report said. This would be achieved by ramping up production of oil and gas, lifting manufacturing exports and attracting investment in light electronics assembly, fertilisers, sugar and palm oil. But Nigeria would need to more than double exports from $42.4 billion last year. Foreign reserves, which have been falling, stood at $35.25 billion at the end of May, official data shows. The revenue authority, customs and maritime agencies would be collapsed into a new single Nigerian Revenue Service to improve tax and revenue collection, the policy document showed. With more revenue, the government can ramp up capital expenditure to 25% of gross domestic product from 4.1% and narrow the budget deficit to 3% of GDP, down from 4.78% estimated for this year, the document said.