Tinubu could order CBN to peg the exchange rate at ₦30 to $1, but at what cost to our economy?

If President Tinubu wants the Naira to be exchanged for ₦30, he can order CBN to peg the exchange rate. This means he will have to pay the shortfall in the form of a subsidy to the forex market. This was what the former presidents were doing.
It was an artificial exchange rate.

Under Goodluck Ebele Jonathan, the federal government then pegged it at ₦380 to $1 and was subsidizing to keep it at that rate with $750million monthly.

Under Buhari’s administration, the sum to keep it peg has risen , so it was jerked up to N750 to $1 to lower amount needed to subsidize it. Then the administration was paying $1.5bn monthly to the forex market to keep the rate .

Perhaps, if Tinubu was to continue in that vague line, it would have needed over $5bn monthly to subsidize the exchange rate at ₦1,000 to $1.

However, these subsidy funds have led us to huge loans from Brentwood, China, etc. since almost all our resources were going into subsiding petrol, forex, electricity etc which were being majorly benefited by the rich and the elites in the nation

It became obvious that Nigeria was heading to total collapse as 98% of our total revenue was going into debt servicing.

That means that after paying for debt services, we needed to borrow more to fulfill all other government responsibilities, including paying workers’ salaries.

It was obvious, our nation was near bankruptcy and almost collapsing.

So, President Tinubu chose the way out of the problem rather than continuing with the surface dress practice and destroying the country. He chose to allow the naira to catch its real worth and value without the government borrowing to subsidize it by fixing it at an artificial value to look popular while the country was almost going to collapse.

He chose to allow petrol to sell at its market price with a bit of regulation so as not to over-suffocate Nigerians since we do much rely on petrol for so many other things.

So, it’s about Tinubu who has chosen to peel open our economic wound and now dressing it to heal the wound totally unlike the surface dressing of past administrations which were just balms to relieve the pains without treating the wounds.

The administration inherited a reserve of over $33bn 16 months ago. Since then, we have paid back the inherited forex backlog of $7bn.

It also cleared the ways and means of inherited debt which was what was being used to keep forex under Obasanjo, Jonathan, and Buhari’s administrations, for Naira to exchange at the lowest its actual value. So the way and means a debt of over ₦30 trillion was cleared by Tinubu’s administration without incurring any more under this.

The administration has also reduced the debt service ratio from 97 per cent of our total revenue to 68 per cent.

Despite all these, it has managed to keep the foreign reserve up at $37bn and continue to meet all other obligations and pay our bills without resorting to borrowing like before

As the president said today, “We found ourselves at a dizzying crossroads, where we must choose between two paths: reform for progress and prosperity or carry on business-as-usual and collapse. We decided to reform our political economy and defence architecture.”

There will be a better Nigeria, let’s persevere and support the Tinubu administration to succeed,!

God bless Nigeria
Copied by A. Ayofe
@abdullahayofel