The Nigerian government has spent approximately $8 billion in an attempt to stabilize the naira amid ongoing economic turmoil, according to Bismarck Rewane, CEO of Financial Derivatives Company.
Speaking on Channels Television’s News at 10 on Friday, Rewane highlighted the substantial interventions made to manage the country’s currency fluctuations and combat inflationary pressures.
His remarks follow the Monetary Policy Committee (MPC) meeting of the Central Bank of Nigeria (CBN) on Thursday, where the committee maintained the Monetary Policy Rate (MPR) at 27.50%.
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Rewane explained that beyond direct interventions, the government has also resorted to external borrowing to further prop up the naira.
“We’ve also borrowed $4 billion in bond issues. When you take a look at that, you’ll see there is a lot of work. We’ve actually spent almost $8 billion trying to support the naira at current levels,” he said.
Despite this massive expenditure, the naira remains under intense pressure, with inflation and forex volatility persisting, raising concerns about the effectiveness and sustainability of the government’s interventions.
The Problem with Inflation Data Rebasing
Rewane also addressed the recent rebasing of Nigeria’s inflation data, a move that has sparked widespread skepticism. He outlined three different methods of calculating inflation, each yielding significantly different figures:
- Old Method: Inflation stands at 34.8%
- New Method (Rebased Data): Inflation drops to 24.4%
- Market Survey (Real Inflation): Inflation is closer to 33%
Expressing doubts over the sharp drop in inflation figures based on the rebased method, Rewane argued that the figures do not reflect the economic realities of ordinary Nigerians.
“There’s no way that inflation can reduce by 10% in a short period. The man on the street does not believe that inflation has come down as sharply as that,” he stated.
The National Bureau of Statistics (NBS) recently revised its Consumer Price Index (CPI) methodology, adjusting the weight of key commodities in inflation calculations. However, many analysts argue that this does not change the fact that prices of food, fuel, and essential goods continue to rise.
The revelation that the current administration has spent $8 billion defending the naira comes months after President Bola Tinubu’s administration criticized the past government for reportedly spending $1.5 billion monthly to defend the naira while maintaining an artificially low exchange rate.
Under Buhari, Nigeria’s central bank kept the exchange rate at around N400/$1, compared to the over N1,400/$1 rate seen under Tinubu. Buhari’s government also maintained inflation at a lower rate, prompting comparisons between the effectiveness of both administrations’ FX policies.
However, the Buhari-era strategy involved strict foreign exchange controls, multiple exchange rates, and restrictions on forex access, policies that the Tinubu administration has since reversed in favor of a market-driven exchange rate system. This shift, though designed to attract investment and increase dollar liquidity, resulted in sharp currency depreciation and rising inflation.
CBN Governor Expresses Optimism
The CBN Governor, Olayemi Cardoso, remains optimistic about Nigeria’s economic trajectory, citing recent macroeconomic trends as indicators of potential stability.
“At this meeting, the Monetary Policy Committee noted with satisfaction, recent macroeconomic developments which are expected to positively impact the price dynamics in the near to medium term.
“These include the stability in the foreign exchange market with the resultant appreciation of the exchange rate and the moderation in the price of PMS,” Cardoso said.
But he admitted that inflationary pressures persist, particularly due to rising food costs, and that the rebasing of inflation metrics would take time to reflect in daily life.
What This Means for Nigerians
For everyday Nigerians, the economic landscape remains deeply challenging, as the high cost of living continues to erode purchasing power. While the CBN and government officials project optimism, many remain unconvinced, given the sharp depreciation of the naira and the skyrocketing cost of goods and services.
Furthermore, the revelation that $8 billion has already been spent on defending the currency, even though the FX market was floated, has sparked concerns over the true value of the naira. There is concern that Tinubu’s administration could end up spending even more than Buhari and yet the naira will not perform better.
