By Aduragbemi Omiyale
A notable global investment company, Goldman Sachs, has expressed surprise at the positive impact of the policy changes of President Bola Tinubu on the Nigerian economy.
Mr Tinubu was sworn in as President on May 29, 2023, and during his first speech, he announced an end to fuel subsidy, his intention to unify all exchange rate regimes and clean up the Central Bank of Nigeria (CBN) for sound monetary policies.
This week, precisely on Wednesday, the CBN officially floated the Naira and collapsed all other foreign exchange (FX) segments into the Investors and Exporters (I&E) window.
Reacting to this development, Goldman Sachs said while it welcomes the exchange rate convergence, the apex bank needs to give clarity on how the new system will work.
However, the firm praised the current administration for renewing the confidence of investors in the economy.
“More broadly, we have been positively surprised by the pace of policy changes announced by the Tinubu administration in the last two weeks since the President’s inauguration, which in our view, are supportive of sovereign credit.
“While the end-game for monetary/FX policy still remains quite uncertain, we nonetheless interpret the incremental developments as positive,” the financial institution said.
It pointed out that the government was yet to give guidance on the “policy preferences with respect to the FX regime.”
“Additionally, following the suspension of former CBN Governor Emefiele, the new administration has not yet made an appointment for a new governor.
“Thus, it remains uncertain whether the CBN will re-peg the currency at a new (weaker) level or might move in the direction of introducing some currency flexibility (in the extreme, a free-float),” it stated.
But the company noted that based on its analysis and the current prices of crude oil, “The Naira adjustment needed to rebalance the current account into a sustainable surplus would entail a devaluation to around N750 to a Dollar.”
