The Minister of Finance, Olawale Edun, revealed that the federal government is setting its sights on foreign exchange held outside the formal banking system as a solution to the ongoing liquidity crisis in the FX market.
Speaking before the House of Representatives Committee on Finance on Tuesday, Edun emphasized that the forex reserves held by Nigerians in cash represent a substantial new source of foreign reserves, amounting to billions of dollars. He underscored that this significant pool of liquidity is currently outside the purview of traditional banking channels.
“The foreign exchange held by Nigerians in cash outside the formal banking system runs into billions,” Edun stated.
The minister further disclosed that an executive order issued by President Bola Tinubu is intended to streamline the process of integrating these substantial financial resources into the formal banking system.
“President Bola Tinubu has approved an executive order to facilitate the transfer of these funds into the banking system,” he affirmed.
Edun also concurred with lawmakers who expressed concerns over the substantial annual cost of tax waivers, which reportedly amounts to trillions of naira without yielding significant benefits.
In response to the committee’s apprehensions, Saidu Abdulahi, the deputy chairman, suggested the potential merits of temporarily scrapping the policy for a year to assess its impact. The minister aligned with this perspective, acknowledging that the government should explore alternative mechanisms such as tax rebates.
The minister’s remarks shed light on the government’s proactive approach to harnessing untapped foreign exchange resources within the country to address the prevailing FX shortages and leverage these funds for sustainable economic development.
The development underscores the government’s commitment to exploring innovative strategies to alleviate currency challenges and enhance national economic resilience. With a focus on streamlining forex transactions and bolstering the formal banking system, the administration aims to foster a more robust and sustainable financial ecosystem, which is essential for driving economic growth and stability amidst evolving global financial dynamics.
