June 16, 2023

Nigeria should target an exchange rate of between 500 and 600 naira 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.

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.

REUTERS