‘Unification of exchange rates will boost FDIs, but increase dollar-denominated debts’

The decision of President Bola Tinubu to ensure unification of the exchange rates in Nigeria has attracted varying views from analysts. While some contend that it boost investors’s confidence thus attract Foreign Direct Investment(FDI), others are of the opinion that the official exchange rate will increase and thus increase the amount Nigeria will use in servicing its dollar-denominated debts.

Yet others are contending that, converging the rates will increase the amount of money the country will expend in the importation of petroleum products.

Joe Ekiko, a merchant banker told Blueprint that, already foreign investors are tickled with the announced policy direction of the new president, Bola Tinubu. According to him, nothing scare investors away like an opaque market, where there is no transparency.

He explained that, where you have more than one exchange rate , is often a no go area for investors who like to make projections based on accurate and transparent windows.

But Bolanle Oke, a retired banker said, most of the announcement made by the new president are in order.

“The only thing lacking is methodology or what some may refer to phased planning. For one, the increase in official rate will immediately translate to more scarce funds for servicing dollar-denominated debts.

“In addition, if the president has calmed down a bit to watch event carefully, he may have not announced the immediate removal of fuel subsidy, since the commissioned Dangote Refinery will resume production in matter of weeks from now.

“The meaning is that, when the home refinery starts production, foreign reserve will be saved and the present agony Nigerians are going through would not have been necessary.

Importantly, the unification of exchange rates which would mean more spending to import fuel would have been averted”, she said.

The refinery when fully operational is expected to generate $10 billion from the export of refined petroleum products and save Nigeria an estimated $10 billion in foreign exchange.