Naira crude deal: LCCI proposes exchange rate peg ₦1,000/ $1

The Lagos Chamber of Commerce and Industry (LCCI) has come forward with a proposal that could potentially revolutionize the oil industry in Nigeria. The LCCI is suggesting that crude oil supplied to refineries in the country should be pegged at an exchange rate of 1,000 Naira to the dollar. This move, according to the Chamber, aims to significantly reduce the cost of petrol for end users, consequently lowering logistics and transportation expenses. Gabriel Idahosa, President of the LCCI, emphasized the importance of clear guidance from the government on its policy direction and the necessity of achievable near-term goals to enhance certainty and facilitate business planning. In a recent interview with CNBC Africa, Mr. Idahosa shed light on the practicality and benefits of this new proposal. He highlighted that this initiative is part of a series of stimulus packages essential for reviving the economy post major policy reforms. The primary agenda now is to implement various stimulus measures at federal, state, and local government levels without disrupting fundamental policies like foreign subsidy removal and exchange rate unification. By pegging the conversion rate of crude at 1,000 Naira to the dollar, the cost of crude oil could decrease by up to 50%, leading to a substantial reduction in petrol prices. This reduction would directly impact transport costs, transport inflation, and food inflation. Additionally, adjusting customs duty rates could lower production costs for manufacturers and reduce prices for consumers. These proposed fiscal decisions have the potential to significantly combat inflation and boost economic growth. Furthermore, Mr. Idahosa acknowledged the recent interventions by the government, such as the VAT exemption on CNG and LNG, waiver on food imports duty, and focus on electric vehicles, as steps in the right direction to mitigate FX pressure and lower commodity prices. Despite these efforts, businesses continue to face challenges like high energy costs, FX shortages, and diminished purchasing power. In response to the near-term economic outlook, Mr. Idahosa expressed cautious optimism contingent on substantial stimulus packages from both fiscal and monetary authorities. He advocated for massive investments in the CNG value chain to reduce transportation costs, create employment opportunities, and capitalize on untapped gas reserves in the country. By diverting funds towards the expansion of CNG infrastructure and supporting exploration and production activities, Nigeria could witness a transformative shift in its energy landscape. Consequently, this would not only stimulate economic growth but also address key issues such as inflation and job creation. Despite the prevailing regulatory complexities and economic uncertainties, Mr. Idahosa remains hopeful for a recovery in the Nigerian economy, aligning with the revised growth projections for Sub-Saharan Africa by the World Bank. However, he stressed the urgency for proactive measures and sustained government support to navigate the current challenges and propel the country towards lasting prosperity.