Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, has identified illicit demand as the biggest challenge facing Nigeria’s foreign exchange market. He made this assertion on Saturday during the Platform Economic Outlook for 2025 event, organised by The Covenant Nation, where he was one of the key speakers.
The Forex Dilemma
In June 2023, segments of Nigeria’s foreign currency market were harmonized, resulting in a significant depreciation of the naira. As of the close of trading on Friday, the naira stood at ₦1,547.58/$ on the NAFEM platform managed by the FMDQ and ₦1,660/$ in the parallel market.
Speaking on the issue, Oyedele stated, “Nigeria’s biggest problem with FX is not the supply of FX; it is the illicit demand for FX. If I want to be politically correct, I will say it is the discretionary demand for FX in both the public and private sectors.”
He further explained how individuals and entities, both in the public and private sectors, are contributing to this artificial demand. According to him, public officials often mismanage resources, while the elite and middle-class individuals convert savings into dollars out of fear of naira depreciation.
“The domiciliary account balance has increased by more than $6 billion in the last 18 months, now exceeding $30 billion,” he revealed. He recounted a conversation with a billionaire who had converted all his assets to dollars, leading to a scarcity of naira even among the wealthy.
Economic Outlook for the Naira
On the future of the naira, Oyedele projected stability and growth.
“We expect stability in terms of where we are now, and we expect growth to start setting in. I’m not talking about three per cent growth. It needs to be more than that, and it needs to be inclusive,” he emphasized.
Oyedele highlighted improved output in agriculture and industries, along with better performance in the oil and gas sectors, as key factors that could bolster the economy. He also predicted moderation in the monetary policy rate and stability in the foreign exchange rate, with a potential for appreciation.
Tax Reforms to Transform Nigeria
Speaking on tax reforms, Oyedele announced July 1, 2025, as the target date for implementation, contingent on the approval of tax reform bills in the first quarter of the year.
“These reforms are transformational. Structurally, they will help Nigeria and reduce pressure on monetary policy authorities,” Oyedele said. He explained how the reforms aim to stabilize the naira by addressing inefficiencies in the tax system and eliminating practices like demanding dollar payments from businesses for levies, duties, and taxes.
“Nigerian businesses are being asked to pay over $3.5 billion annually in dollars. This practice not only adds pressure to forex demand but also fails to increase dollar supply. We are fixing that,” he assured.
Oyedele concluded by emphasizing that these reforms, the most comprehensive since Nigeria’s independence, will pave the way for economic growth and stability.s, and taxes in dollars worth over $3.5bn a year. Who does that? You send your people to the forex market to look for dollars to pay the government. It doesn’t add one dollar to your supply but adds $3.5bn to your demand. We are fixing that. That is the pressure off the market. The tax system that we have now cannot take us forward. It is holding us back, and that is why we need to fix it,” Oyedele asserted.
