Nigeria: Naira Drops ₦67 as Nigeria Launches FX Disclosure Scheme to Stabilize Market

The naira weakened by ₦67 against the US dollar this past week as Nigeria launched a new foreign exchange disclosure scheme aimed at increasing FX liquidity by drawing out foreign currency reserves held by individuals. The official spot rate depreciated to ₦1,666.72 per dollar from ₦1,600 at the start of the week, despite the Central Bank of Nigeria (CBN) injecting $77 million into banks to ease demand pressure.

In the parallel market, the naira experienced a modest recovery, gaining ₦5 week-over-week to close at ₦1,730.00, partly due to a seasonal slowdown in demand for FX for year-end imports. However, the naira’s exchange rate continued to face challenges despite the FX sales to banks and new measures to encourage the return of foreign-held currency into Nigeria’s economy.

In an effort to stabilize the currency and improve liquidity, the Nigerian government introduced a foreign exchange disclosure scheme last week. The initiative offers amnesty for individuals holding FX outside of banks, exempting them from tax audits and asset seizures. “The scheme provides a secure, confidential channel for reintegrating legitimate foreign-currency funds, promoting economic stability and growth,” Finance Minister Wale Edun explained in a statement.

Through the scheme, the government encourages Nigerians to voluntarily disclose, deposit, repatriate, and invest their foreign currency assets within the formal economy. Issued under Executive Order No. 15 of 2023, titled Disclosure, Depositing, Repatriation, and Investment of Eligible Foreign Exchange Assets and Related Matters Order, 2023, the initiative aims to integrate foreign currency held outside the Nigerian banking system into the formal financial framework.

Minister Edun highlighted that this disclosure scheme seeks to bolster financial security and strengthen Nigeria’s economic resilience. “This initiative is a bold step towards enhancing transparency, stabilizing the exchange rate, and fostering economic growth. By formalizing these foreign currency assets, the scheme reduces the risks of illicit cash transactions and enhances regulatory oversight.”

The disclosure scheme is designed to address vulnerabilities in Nigeria’s financial system by encouraging legitimate cashless transactions within formal channels. Through this framework, the government hopes to promote economic growth and transparency, ultimately providing a more robust foundation for Nigeria’s foreign exchange market.