Nigeria’s external reserves have faced continued pressure, with a notable 8.3% decline from $37.1 billion in January 2023 to $33.9 billion in July 2023, according to Laoye Jaiyeola, Director-General of the Nigerian Economic Summit Group (NESG). He shared this insight during his presentation to the National Economic Council (NEC).
Jaiyeola highlighted the importance of formulating strategies to achieve low inflation, stimulate growth, and address macroeconomic goals. In his review of Nigeria’s current economic landscape, he noted a decline in investment inflows and the investment/GDP ratio since 2019. The trade structure of the country is dominated by crude oil exports and refined petroleum products imports. Additionally, Nigeria’s naira position against major trading currencies has deteriorated.
One of the core factors contributing to exchange rate instability is weak forex supply coupled with heightened demand for imports. Despite recent foreign exchange (FX) alignment efforts, market volatility persists due to inadequate supply and speculative tendencies. The gap between official and parallel market rates widens, driven by FX demand pressure.
Jaiyeola underlined that the removal of fuel subsidies could lead to increased inflation and stressed the importance of robust social programs to counteract its impact. He also advocated for efficiency in government spending, highlighting a lack of transparency regarding the allocation of subsidy savings.
To address Nigeria’s dependence on petrol imports and reduce the need for fuel subsidies, Jaiyeola recommended driving investments into the downstream and midstream segments of the petroleum industry.
Jaiyeola proposed that the NEC focus on advancing a national legislative reform agenda to enhance national competitiveness. He noted that several legislative constraints hinder growth, and the NESG has identified over 115 legislations in this regard. In recent years, 10 legislations, including the Companies and Allied Matters Act (CAMA) 2020 and the Petroleum Industry Act (PIA) 2021, have been passed to address some of these issues.
