In a groundbreaking move, Nigeria is expanding its official currency market to welcome financial technology companies (Fintechs) as legitimate participants. This development was announced by Taiwo Oyedele, a key member of President Bola Tinubu’s committee on fiscal policy and tax reforms, during the Nigerian Economic Summit on October 23. The Nigerian government is also contemplating the prohibition of trading on the foreign currency parallel market.
This decision comes as the Nigerian Naira faces challenges, with a significant drop in value against the U.S. dollar on the parallel market. The exchange rate on the parallel market reached 1,215 Naira for every U.S. dollar, while the official market maintained a rate of 1:795 Naira to the dollar on the same day.
This depreciation follows the recent removal of import restrictions on 43 items by the Central Bank of Nigeria (CBN) to counter the Naira’s depreciation on the parallel market.
Despite these measures, the Naira continues to weaken, raising concerns that it may surpass the 2,000 Naira per dollar mark. Taiwo Oyedele attributes this decline to the market’s inadequate liquidity, stating, “We currently have a market that is not working, and it’s not going to work in its current format. We don’t have sufficient liquidity, even if you combine the parallel and official markets.”
In parallel to these developments, Nigerian Finance Minister Wale Edun has disclosed expectations of foreign currency inflows totaling $10 billion within the next few weeks. However, specific details about these anticipated inflows remain undisclosed, with Edun referring to them as a “line of sight.”
This move to include Fintechs in the official currency market signals a significant shift in Nigeria’s financial landscape and may have far-reaching implications for the country’s economic stability and foreign exchange markets.
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