The House of Representatives has initiated an investigation into the use of the US dollar and other foreign currencies as legal tender for domestic transactions in Nigeria. They have directed the Committee on Banking Regulation to undertake this inquiry. Furthermore, the House has called on the Central Bank of Nigeria to address the devaluation of the Naira against the US dollar and other foreign currencies.
The House has urged the CBN to adjust monetary policy measures to stabilize the Naira, counteract speculative activities in the foreign exchange market, and increase the Naira’s withdrawal limits to reduce the pressure on foreign currencies.
Additionally, the Federal Government has been asked to implement structural changes and measures aimed at combating corruption and promoting economic diversification.
The House also emphasized the importance of bolstering foreign investors’ confidence in the fiscal and monetary policies to stimulate exports and reduce imports. To facilitate these actions, the National Security and Intelligence Committee and the Committee on Banking Regulations will collaborate with the Nigerian Central Bank to initiate compliance efforts.
These resolutions stem from the approval of Hon. Ismaila Dabo’s motion. The House noted that President Bola Tinubu had previously pledged reforms in the foreign exchange market in June 2023 to transition from fixed rates set by the CBN to market-driven exchange rates for buying and selling foreign currencies.
The House recognized that these measures were intended to allow market forces to determine the Naira’s value but acknowledged that the fluctuating exchange rates had adversely affected Nigeria’s economy and caused significant hardship due to increased demand for the US dollar and its limited availability.
The House explained that approximately 90% of Nigeria’s total export revenue comes from oil, which is the backbone of the nation’s economy. However, global oil price fluctuations significantly influence the local foreign exchange market, which has been a primary reason for the Naira’s devaluation.
Despite efforts to unify foreign exchange rates in June, the House pointed out that Nigeria’s foreign exchange inflows have fallen short, with a high demand for foreign currency and limited access to official markets driving transactions to the parallel market.
According to the House, the Naira’s value has significantly declined against the US dollar, falling from N778.602/$ in September 2023 to approximately N1000/$ on the black market. The House acknowledged that this marks Nigeria’s first attempt at liberalizing the foreign exchange market.
The motion reads, “The House is worried about inflation and the cost of living; depreciating naira makes imported goods more expensive, leading to higher inflation rates. This increased cost of living disproportionately affects the most vulnerable citizens, as they struggle to afford basic necessities, which are now glaring across the country.
“The House is also worried about the reduction in investment, as the value of the naira continues to lose value and depreciates against the dollar and other foreign currencies, foreign investors may be deterred from investing in Nigeria, fearing potential currency losses, which is capable of stunting economic growth and hindering the creation of new job opportunities for unemployed Nigerian youth.
“The House is aware that a weaker and depreciating Naira could increase Nigeria’s external debt servicing costs, potentially reducing government spending on critical sectors like healthcare and education.
“The House is also aware that the Central Bank of Nigeria frequently uses its foreign reserves to stabilize the naira, but this can deplete its reserves, making the country vulnerable to economic shocks.
“The House is cognizant that addressing Nigeria’s financial challenges requires collective responsibility from all stakeholders, including Parliament, which has been the voice of the common man,” it said.
