Nigeria’s bold foreign exchange reforms under President Bola Tinubu have not yielded the results many expected, with critics faulting implementation.

The naira has weakened 65 percent against the US dollar at the official market in one year of Tinubu’s administration, after two defacto devaluations by the Central Bank in its push towards a market-determined rate.

Data compiled from the FMDQ Securities Exchange Limited showed that the value of the naira fell to N1,339 per dollar as of May 27, 2024 from N463 quoted in May 2023.

Olusegun Obasanjo, former Nigerian President and one of the critics of President Tinubu’s reforms, said the latter’s removal of petrol subsidy and the unification of FX windows were wrongly implemented.

“Today, the government has taken three decisions, two of which are necessary but wrongly implemented and have led to the impoverishment of the economy and of Nigerians,” Obasanjo said.

These are the removal of subsidies, closing the gap between the black market and official rates of exchange and the third is dealing with a military coup in Niger Republic,” Obasanjo said in a statement Sunday.

At the parallel market, popularly called black market, the naira has in the past one year depreciated by 49.47 percent as the dollar was quoted at N1,500 as against N758/$1 in April 2023.

The naira had initially rallied after the CBN settled foreign exchange obligations owed to manufacturers and local banks and enthroned a more transparent pricing of the naira.

The CBN’s hawkish stance on interest rates which has led to a combined 750 basis points hike this year alone helped narrow the negative real return on naira investments and lure foreign inflows, but has fallen short of taming inflation which is at a 28-year high.

Nigeria’s external reserves also declined in period, sliding 7.21 percent to $32.763 billion on May 22, 2024

The pressure on external reserves arises from several factors such as high demand for foreign currency to meet goods imports and service payments, limited investment inflows due to weak confidence, and limited inflows from crude oil sales due to oil theft.

“For years, the currency exchange was not allowed to move to reflect the difference in US and Nigeria’s inflation rate,” Charlie Robertson, head of Macro Strategy, FIM Partners UK Limited, said in an email response to BusinessDay.

According to him, when economic reality became unavoidable, Nigeria suffered an extreme currency move.

“This has been tough for Nigeria, because unlike Egypt, or probably Ethiopia in coming months, Nigeria did not have the backstop of an International Monetary Fund (IMF) programme, which might have eased the shock,” Robertson said

Nigeria’s determination to act alone means the road is harder, but the right policies have been enacted to improve the situation. The cheap competitive naira will improve the current account and FX liquidity will get better, helping the naira to recover and meaning external reserves should grow,” Robertson said

Chinazom Izuora, senior associate, Parthian Securities, said the decline of the naira over the last year is multifaceted but not unrelated to the decline recorded in the external reserves.

“The unification of the foreign exchange rates by the President Tinubu administration was well intentioned and the consensus opinion is that it was the right thing to do, the main challenges have been policy implementation and change management,” she said.

She noted there were gaps in stakeholder engagement, pre-implementation enlightenment, alignment of policy initiatives and agencies, and ensuring structural and systemic cohesiveness.

In the case of the unification of the exchange rates, various economic commentators have highlighted the issue of foreign currency supply without which they say will continue to ensure the exchange rate is volatile.

The issue of foreign currency supply and the improvement of the market structures and systems should have been completed and adequate time given to enlighten the market operators, stakeholders and the public of the policy and its implications before implementation.

“The lack of proper project management, in this case – a smooth rollout, unfortunately leads to what are often over-reactions by the public which has driven a lot of the volatility we’ve seen in the FX market this year,” Izuora said.

Some of the foreign exchange reforms implemented by the CBN include unification of exchange rates window, liberalisation of FX market, clearing of FX backlog obligations to banks and airlines, introduction of Price Verification System (PVS), limits on banks Net Open Position, Lifting the daily cap of N2 billion on remunerable Standing Deposit Facility (SDF) and reform of the BDC segment.

Other measures include removal of all limits on margins for the International Money Transfer Operator (IMTO) remittances; introduction of a two-way quote system and the broad reforms in the Bureau De Change (BDC) segment of the market to restore stability, enhance transparency, boost supply, and promote price discovery in the Nigeria Autonomous Foreign Exchange Market.

President Bola Tinubu wasted no time in announcing there would be a thorough monetary house cleaning after he assumed office on May 29, 2023.

Days after his assuming office, he suspended the embattled former governor of the Central Bank, Godwin Emefiele, whose unorthodox monetary policy had been widely criticised. Emefiele’s suspension followed an investigation into his office and money laundering accusations

Tinubu appointed Olayemi Cardoso as the CBN Governor, in September 2023 after the resignation of Folashodun Shonubi, who acted as CBN governor since the suspension of Emefiele. All the deputy governors of the CBN under the former governor also resigned.

Since assuming office in September 2023, Cardoso has introduced new policies and adjusted some existing ones to address FX demand pressure, increased dollar supply and to stabilise the Naira