In a bold move to strengthen the naira and promote economic stability, President Bola Ahmed Tinubu plans to implement a significant policy shift that discontinues the payment of taxes and levies in foreign currency through an executive order.
The executive order, titled the "Inflation Reduction and Price Stability (Fiscal Policy Measures, Etc.) Order, 2024," is designed to reduce the pressure on Nigeria's local currency. The order also mandates that all levels of government and their agencies prioritize the procurement of Made in Nigeria goods and services. This comprehensive policy is expected to take effect on May 1, 2024.
An unsigned copy of the executive order, seen by Nairametrics, outlines the key measures to be implemented. A critical excerpt from the document states: “Governments at all levels and their agencies shall patronise MADE IN NIGERIA goods and services to the extent possible. Payments of taxes and levies in foreign currency shall be discontinued to enable the payers pay in Naira while non-critical spending plans by any MDA involving foreign exchange cost shall be put on hold.”
The executive order aims to curb the reliance on foreign currency for tax payments, thereby reducing the demand for dollars and other foreign currencies. This is expected to alleviate the persistent pressure on the naira, which has been struggling against major global currencies. By enforcing payments in naira, the government seeks to stabilize the local currency and control inflation.
Moreover, the mandate for government agencies to prioritize local goods and services is anticipated to bolster the domestic market. This policy is likely to stimulate local production, create jobs, and foster economic growth. The focus on Made in Nigeria products is expected to encourage innovation and quality improvement among local manufacturers, as they strive to meet the increased demand from government agencies.
The directive to halt non-critical foreign exchange spending is another significant aspect of the order. This measure is aimed at conserving the country’s foreign reserves and ensuring that foreign currency is allocated to essential needs, such as the importation of critical goods and services that are not produced locally.
Economists and industry experts have largely welcomed the executive order, viewing it as a necessary step to address the country's economic challenges. They argue that reducing dependency on foreign currency for routine transactions and fostering local industries are crucial for achieving long-term economic stability.
However, some concerns have been raised about the potential short-term impact on businesses that rely heavily on foreign goods and services. There is a fear that the abrupt transition might lead to supply chain disruptions and increased costs for these businesses. The government will need to provide support and clear guidelines to ensure a smooth implementation of the policy.
In summary, President Tinubu's executive order represents a strategic effort to strengthen the naira, reduce inflation, and promote local industries. By discontinuing foreign currency tax payments and mandating the procurement of local goods and services, the government aims to create a more self-reliant and stable economy. The success of this policy will depend on effective implementation and the cooperation of all stakeholders involved.
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