How can Nigeria curb naira's free fall?

Nigeria's President Bola Tinubu has announced efforts to address the growing foreign exchange (FX) backlogs as the naira continues its downward spiral against the US dollar in the parallel market. Amidst these challenges, the Business and Property Court in London has delivered a favorable verdict in the case involving the Nigerian government and Process and Industrial Developments (PNID). Johnson Chukwu, the CEO of Cowry Asset Management, joined CNBC Africa to provide insights into these critical issues. The recent announcement by the Nigerian government regarding a $10 billion expected inflow into the economy has been welcomed as a confidence booster by market players. However, Chukwu highlighted the importance of transparency in revealing the sources of this significant inflow to assess its realism and timing accurately. Without this crucial information, the impact of such a substantial sum remains uncertain. The lack of access to FX and the challenges faced by businesses further emphasize the necessity for concrete details to support the government's claims. The resolution in the PNID case has brought relief and jubilation among Nigerians. Chukwu expressed his gratitude for the ruling in favor of Nigeria, noting that a negative judgment would have posed a significant financial burden, potentially amounting to $11 billion. The court's decision to dismiss the allegedly fraudulently induced contract has averted a major crisis for the country. The successful outcome of this legal battle is a positive development amid the ongoing economic challenges faced by Nigeria. With the focus on clearing the FX backlogs, discussions have also shifted towards the long-term implications for the naira's value once these immediate issues are resolved. Chukwu emphasized that the current depreciation of the naira is largely driven by market panic due to the absence of significant inflows and the uncertainty surrounding the FX rate management. Clearing the backlogs and restoring confidence in the market will likely reduce panic-driven activities, such as front-loading orders, and attract foreign portfolio investors back to the market. The creation of liquidity through these measures is essential for stabilizing the naira and fostering a more favorable exchange rate environment. While the concerns about sustaining confidence and ensuring consistent liquidity persist, Chukwu outlined various sources of liquidity that can support the economy. Apart from export earnings, which heavily rely on crude oil production, monetary policy tools can be utilized to influence capital flows and stabilize exchange rates during supply-demand imbalances. To secure long-term capital inflows, Nigeria must identify investment opportunities and create an attractive investment climate for foreign investors. Projects in key sectors like transportation infrastructure and modernization initiatives are highlighted as potential areas for significant foreign investment. By focusing on sustainable economic growth and attracting foreign direct investment, Nigeria can achieve a more stable and resilient economy in the long run. Chukwu's insights shed light on the critical steps needed to address immediate challenges and pave the way for a more robust economic future in Nigeria.