Addressing the Growing Gap: Analyzing Nigeria's Exchange Rates and Fiscal Policy Reforms

Feranmi Olaseinde

Feranmi Olaseinde

Jul 15, 20233 min read


Addressing the Growing Gap: Analyzing Nigeria's Exchange Rates and Fiscal Policy Reforms


The Nigerian economy has long been plagued by a growing gap between official and black market exchange rates, causing concern among analysts. In an effort to bridge this gap and bring about much-needed stability, recent developments have taken place that aim to improve the accuracy of exchange rate calculations and implement fiscal policy and tax reforms. This article delves into these developments, their potential impact, and provides actionable advice for addressing these issues.

Closing the Gap: Improving Exchange Rate Accuracy

Previously, the Nigerian Autonomous Foreign Exchange Rate Fixing (NAFEX) and the Investors' and Exporters' (I&E) FX Window Spot Rates were determined solely based on indicative quotes submitted by traders. However, a market notice issued by FMDQ Exchange has now mandated the use of actual foreign exchange market transaction data for rate calculation. This shift towards using real deals rather than quotes offers a more accurate representation of market dynamics, reducing the potential for manipulation and speculation.

Enhancing Fiscal Policy and Tax Reforms

Recognizing the need for comprehensive fiscal policy and tax reforms, President Bola Tinubu has approved the establishment of a presidential committee to spearhead these efforts. Leading this committee is Taiwo Oyedele, a seasoned fiscal policy partner and Africa tax leader at PwC Nigeria. This move signifies a commitment to addressing the underlying issues that contribute to the exchange rate gap and economic instability.

The Interplay: Connecting Exchange Rates and Fiscal Reforms

While the exchange rate gap and fiscal policy reforms may seem like separate issues, they are inherently interconnected. A stable and accurate exchange rate is crucial for attracting foreign investment and promoting economic growth. On the other hand, sound fiscal policy and tax reforms create an enabling environment for sustainable economic development. By addressing both these aspects concurrently, Nigeria can strive towards a more robust and resilient economy.

Actionable Advice:

  • 1. Promote Transparency and Accountability: Enhancing transparency in exchange rate calculations and fiscal policy implementation is vital. This can be achieved through regular audits, public disclosure of data, and clear communication channels with stakeholders. Transparency builds trust and confidence, attracting both domestic and international investors.
  • 2. Strengthen Regulatory Oversight: Effective regulatory oversight ensures compliance and prevents market manipulation. Implementing robust monitoring mechanisms and stringent enforcement measures can help close loopholes that lead to the divergence between official and black market rates.
  • 3. Encourage Public-Private Collaboration: Collaboration between the government and private sector is essential for implementing successful fiscal policy and tax reforms. Engaging relevant stakeholders in the decision-making process and seeking their input can lead to more effective and inclusive policies that address the needs and concerns of all parties involved.


Nigeria's efforts to bridge the gap between official and black market exchange rates and implement fiscal policy and tax reforms are promising steps towards economic stability and growth. By incorporating accurate market data in rate calculations, enhancing transparency, strengthening regulatory oversight, and fostering public-private collaboration, Nigeria can create a conducive environment for sustainable economic development. It is crucial for all stakeholders to work together to ensure the success of these initiatives and pave the way for a prosperous future.

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