Despite the many prospect-full decisions of the present regime (ranging from: establishment of the treasury single account, improvements in the power sector, reforms to the Nigerian National Petroleum Company, and reforms to increase non-oil fiscal revenues and cut fiscal expenditure), the international ratings agency (Standards and Poors) has revised Nigeria’s sovereign credit outlook from Stable to negative signaling that a ratings downgrade could be placed on Nigeria if things don’t improve. This warning was predicated on the nation’s forex policy which it regards as “creating dislocations in products and financial markets”.
At the moment, the official rate is at N199.56/$ while the unofficial rate is around N345/$; thus, a disparity of about N145/$ due to forex scarcity which ensued from a decline in forex inflows from oil exports. By implication the CBN’s non-devaluation monetary policy stance implicitly portends threats to intending foreign direct investors and possibility of securing the much need forex for functional operations at affordable rates. As such, should S&P explicitly downgrade our forex ratings, it would mean a significant decline in Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI).
In the light of these, the government lately plans introduced a subtle second-tier forex market approach where selected non-priority list necessities (like foreign school fees) are provided with forex at rates higher than the official rate but lesser than the parallel rate; while priority list necessities (petroleum importation, raw materials importation, equipment and machineries importation, etc.) would be at the interbank rate. Thus, the government is attempting to correct the negative foreign investment implications while protecting the economy from the adverse effects of devaluation (loss of value in FPIs, reduced purchasing power to procure the forex priority list commodities, etc.). 4��4��