The Finance Minister, Mr. Wale Edun, has talked about what the Central Bank of Nigeria Governor, Mr. Yemi Cardoso, said regarding the pressure on the foreign exchange (FX) market due to money distribution to different government levels in Nigeria.
Mr. Edun discussed this issue during a meeting in Washington D.C. He mentioned that the main problem for Nigeria’s FX market is not having enough foreign currency. Since Nigeria makes oil, it can solve this problem by producing more oil.
He explained, “The main thing about our foreign money market is that we don’t have enough supply. Because we produce oil, if we make more, it can help fix this problem with foreign money.”
On the topic of lowering the interest rate, Mr. Edun said that the Central Bank will continue to make money policies stricter until prices stop rising too fast. He mentioned that other countries in the West can reduce their interest rates because they have managed to control inflation.
Background
Recently, at a Central Bank meeting, Mr. Yemi Cardoso, who also leads these meetings, said they’ve noticed that when money is given out by FAAC, it affects the demand for foreign money.
He said they will keep an eye on future FAAC money distributions to see how they impact the FX market.
He mentioned, “We saw a strong link between FAAC money being released and how much money banks have, as well as its effect on exchange rates.”
“The committee agreed to watch future FAAC releases closely to manage its impact on prices.”
Important Information
In May 2023, when the government stopped paying for fuel subsidies, the money given out monthly by FAAC increased. This change was because they no longer had to pay for those subsidies.
Also, there is a difference between the 2024 budget exchange rate of N800/$ and the current rate, which has helped increase FAAC payments.
A study found that from May 2023 to April 2024, gains from changes in exchange rates added N4.23 trillion to money given out by FAAC, making up about 20% of the total given out. In the past four years, these gains were just 1.32% of total FAAC money distributed.