Era Of Multiple Exchange Rates Coming To An End As Nigeria's Revenue Leaks

The era of multiple exchange rates is coming to an end in Nigeria according to the Minister of Finance, Zainab Ahmed. For years, there have been talks about Nigeria adopting a unified multiple exchange rate, and now, the idea has been embraced by the Nigerian government.

In a Ministry of Finance document, Ahmed was said to have stated that Nigeria will unify the multiple exchange rates in order to generate more local currency from its dollar inflows. Ahmed said the rate will be managed in a sustainable way, Reuters reported. The new development comes at a period the country is having forex problems caused by the oil price crash and the economic fallout of the coronavirus pandemic in Nigeria.

The COVID-19 outbreak had hit global market, affecting demand for oil, leading to a crash in oil as demand declined. Nigeria had been limiting its dollar sales to the central bank which sells to commercial banks that later sell to the public only for goods or raw materials that are not produced or can't be found in Nigeria.

Nigeria Initiates Measures To Protect Weak Economy

The multiple exchange rate regime is being used by the Central Bank of Nigeria (CBN) to manage pressure on the naira. According to Ahmed, oil firms will be directed by the government to sell forex to the CBN rather than the Nigerian National Petroleum Corporation (NNPC). This is expected to help with the forex problem currently being faced within the country.

It was also reported that one of the measures to protect revenue from oil will include deregulation of petroleum prices. The document stated that over a period of 12 months, the policy will be implemented. The measures are expected to aid the weak revenue sources of the government.

Nigeria's Revenue Sources Leaking Heavily

Nigeria's revenue sources has been hit hard by the coronavirus pandemic following a shortfall in revenue from oil, Companies Income Tax, Value Added Tax, Nigeria Liquefied Natural Gas, mining and mineral. According to documents from the Budget Office of the Federation, Nigeria's federation account is bleeding significantly, with a revenue shortfall of about N1.01 trillion in the first three months of 2020.

According to the documents obtained by thewhistler.ng, the Federal Government generated about N950.55 billion compared to the projected revenue target of N1.96 trillion earmarked for the first quarter of this year. This represents about 52 per cent decline or N1.01 trillion shortfall.

Further breakdown of the revenue projection and actual earnings showed that revenue from oil suffered a 30 per cent decline, resenting a shortfall of N195.37 billion after generating N464.03 billion in the first three months of 2020, lesser than the projected revenue target of N659.4 billion.