Rewane says ongoing palliatives, policies offer temporary relief

Current palliatives and some of the policies being rolled by the fiscal and monetary policy managers can only provide some form of temporary relief, Bismarck Tewane, Chief Executive Officer (CEO) of Financial Derivatives Company (FDC) Limited said.
The FDC in its maiden edition of the Whisperers recalled that in the heat of the challenges (including the staggering petrol price at N617/litre and the free fall of the naira) faced by Nigerians, the president has unveiled a cocktail of social safety nets for the average Nigerian. Complementing the initial N500 billion palliative package, the FG recently granted approval for an additional N180 billion to be distributed among the 36 states and the Federal Capital Territory (FCT).
Alongside that, Rewane also notes that, the NNPCL secured a $3 billion emergency crude repayment loan to shore up the reserves and aid the Central Bank of Nigeria (CBN)’s efforts to defend the naira.
In response, the naira at the parallel market appreciated for three consecutive days, closing at N855/$ today from a low of N955/$, while the official rate is stable at N799/$.
“The sustained appreciation of the naira at the parallel market will likely reduce import costs, potentially alleviating the pressure on prices. Supporting this temporary relief for Nigerians will be the expected uptick in oil receipts as the Forcados terminal resumes exports”, he said.
But other analysts wondered if government will continue to support the naira by borrowing dollars?
Others say, by the singular act of borrowing to help the naira means the government, by extension, the apex bank has reneged on their earlier policy of floating the foreign exchange market to be left to market forces.
Rewane said, the scramble for the US dollars in Nigeria has set off alarm bells about the possibility of Nigeria adopting a bi-monetary system, where the dollar and local currency are legal tender.
“While dollarization has its perks, particularly in luring foreign investments, it also comes with gnarly risks like the loss of monetary policy autonomy, making it harder to manage inflation and respond to economic shocks. Unfortunately, one unintended consequence of spiralling inflation, unchecked by monetary policy authorities is declining investor confidence”, he said.

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