The Institute of Chartered Accountants of Nigeria (ICAN) has applauded the unification of Nigeria’s foreign exchange rate, saying that it would stimulate the growth of the securities market and attract foreign investments into the country.
The Institute said that it is expected that the action would generally lead to short-term pains that will yield long-term gains.
A statement by the institute said that the previously adopted double-window exchange rate played a huge contributory role in fueling high inflationary pressure, corruption, high debt burden and reduced investments into the country.
It noted that the unification of the exchange rate would increase the government’s revenue in naira terms, which would result in a higher tax/revenue to GDP ratio.
The statement read partly, “The inflow of capital from foreign portfolio investors into the Nigerian capital market will help grow the market and allow companies to raise capital efficiently to finance their growth ambitions.
“It is expected that the unified exchange rate will serve as a catalyst for investment flows into the country, which will boost our foreign exchange reserve, grow the economy, create employment, and improve the quality of life. Foreign portfolio investors are expected in the near term whilst foreign direct investors that require more investment appraisal time will come in subsequently.”
On the flip side, the institute said corporate tax collection may decline as many businesses would experience foreign exchange losses due to the higher exchange rate.
It also noted that the service cost of the government’s external debt which is denominated in foreign currency, would go up, adding that Nigeria’s current public debt, which currently stands at over $40 billion would increase by N12 trillion.
The total debt to Gross Domestic Product ratio, ICAN said would also increase by five per cent due to the total debt rising to N90 trillion.
It read further, “This new policy is applauded by the Institute of Chartered Accountants Nigeria. It is expected that this action will generally lead to short-term pains that will yield long-term gains. We, however, provide the following recommendations to ensure that the desired objective of this policy is achieved and there is growth in the Nigerian economy.
“Timely appointment of a new CBN governor, who will provide a credible long-term direction for this policy: This will provide certainty and stability, and boost investor confidence to inflow capital into the country. Effective and consistent implementation of the policy: This will ensure that no uncertainty is created by the mode of implementation and there is constant communication with key stakeholders such as businesses and investors amongst others”.
