To avoid company collapse caused by ongoing foreign exchange (FX) issues, operators have emphasized the necessity for the government to provide fiscal incentives to industries that attract FX into the nation.
A backlog of unfulfilled FX promises and pro-market change had delivered a turbulent year for the naira in 2023, resulting in a 50% drop in the currency’s value.
Analysts projected that the naira’s downward trend would continue through much of 2024. Operators said the country urgently has to remove FX supply limits, boost its weak foreign reserve, and stabilize the currency rate to avoid impending job loss and firm collapse caused by the unpleasant trend in 2024, particularly among small businesses.
The local currency fell 4.72% to close at N878.57 to the dollar at the conclusion of business on Tuesday. This indicates an N39.62 loss or a 4.72 percent decline in the local currency from the previous day’s closing price of N838.95.
Victor Chiazor, Head of Research at FSL Securities, stated that based on the trend, businesses, and organizations requiring foreign exchange to operate in Nigeria have continued to find it difficult to run their operations due to the scarcity and high volatility of FX.
Chiazor stated that the government should invest in the necessary infrastructure to promote the industrial sector while also boosting its native currency.
Furthermore, he stated that significant expenditures and cleanup efforts in the oil sector are essential, as well as incentives to assist industries that bring foreign exchange into the country in meeting international standards.
“Reorganisation of the Nigerian ports to increase service delivery and reduce bottlenecks around exporting goods from Nigeria among other issues will need to be expressly addressed by the government if it intends to increase the flow of FX to the country and stabilize the exchange rate,” the minister added.
Patrick Ajudua, President of the New Dimension Shareholders Association of Nigeria, stated that because foreign exchange concerns are vital to the survival of most businesses, particularly those in the manufacturing sector, the government must move quickly to stabilize the market.
“We need to put an end to the naira’s continuous depreciation; it is detrimental to economic planning.” Rather, it reduces consumer purchasing power and, as a result, causes merchants to lose money. This is the primary reason multinational corporations and other publicly traded enterprises are leaving the country.”
“Imagine a situation in which foreign airlines are unable to obtain dollars for their operations, or where businesses are unable to pay overseas creditors for raw materials supplied. The situation is exacerbated by the fact that $7 billion in unremitted funds remain due.”
“Also of concern is the dollar’s consistent depreciation against the naira.” No government will let its currency float without regulatory oversight. We are not exporting commodities to gain foreign cash, and we do not have a diverse economic foundation on which to rely,” he stated.
Moses Igbrude, President of the Independence Shareholders Association of Nigeria, stated that boosting logistics performance allows developing economies to engage more extensively in overseas trade and exports.
However, he bemoaned a situation in which Nigeria is thought to lose an estimated $15 billion each year owing to congestion and other nautical challenges at the country’s seaport.
He proposed that policy measures aimed at incentivizing exporters be intensified, while bottlenecks and superfluous logistics that prevent free movement of goods and result in revenue losses at ports be abolished.
