The first 100 days in office for President Tinubu have seen a series of fiscal policy changes that have begun reshaping the economic and political landscape of Nigeria. Major variations include the unification of the Naira, the removal of the fuel subsidy, and the appointment of a new economic council. In this paper, we will examine the impact of Two key policy changes, namely the removal of the fuel subsidy and the Central Bank of Nigeria’s (CBN) decision to lift the ban on the sale of foreign exchange (forex) to Bureau De Change (BDC) operators.
One of the most significant policy announcements made by President Tinubu at his inauguration was the termination of the fuel subsidy. Companies heavily reliant on logistics and transportation, particularly those in the manufacturing sector, were anticipated to face challenges due to the consequent surge in fuel prices.
Data reveals that the selling and distribution costs of 19 listed manufacturing companies on the exchange conspicuously increased by a cumulative 14%. GSK and Unilever PLC, both experiencing changes in operating circumstances, reportedly mitigated this impact to an extent. GSK, in the process of ceasing its operations in Nigeria, saw a decline in distribution cost by 37%. Unilever PLC, having recently parted with its core product, Blue Band, also reported a decrease in distribution costs by 65%.
The CBN’s decision to lift the ban on the sale of forex to BDCs is a significant policy change that could have a number of implications.
On the one hand, it could help to address the scarcity of forex in Nigeria. BDCs are a major source of foreign exchange for businesses and individuals, and their ability to access forex from the CBN could help to increase the supply of forex in the market. This could lead to a decline in the black market rate for the dollar, which has been rising in recent months.
On the other hand, there are also some risks associated with this policy change. For example, it could lead to increased speculation in the forex market, as BDCs may be tempted to buy and sell dollars in order to make a profit. This could further destabilize the market and make it more difficult for businesses and individuals to access forex at a reasonable price.
Overall, the impact of the CBN’s decision to lift the ban on the sale of forex to BDCs is uncertain. It is possible that it could help to address the scarcity of forex, but it also carries some risks. Only time will tell how this policy change will play out.
Here are some of the factors that could affect the outcome of this policy change:
– The extent to which BDCs are able to access forex from the CBN.
– The level of demand for forex in Nigeria.
– The behavior of BDCs in the forex market.
– The actions of the CBN to regulate the forex market.
In conclusion, time will be the ultimate judge of what effects these policy changes have on Nigeria’s economy. It is essential for corporations and markets to stay vigilant and adaptable in the face of these changes to ensure sustainable business growth.