- U.S. Dollar Free Fall Against Naira
The U.S. dollar continues its free fall against the Naira on Monday, following additional sales of $180 million by the Central Bank of Nigeria for settlement of various transactions.
The local currency gained N10 to exchange at N450 to a US dollar at the parallel market, while both the Pound Sterling and the Euro exchanged at N560 and N470 respectively.
On the interbank market, the Naira traded at N305.50 against the US dollar.
While at the Bureau De Change segment, the Naira closed at N399 to a dollar, the CBN stipulated exchange rate. The Pound and the Euro closed at N610 and N500.
Currency traders expressed confidence in the new Forex policy and its ability to reduce scarcity and improve the Naira value.
However, some traders that are still in shock of the drastic appreciation, believed its a temporary situation and that the local currency would sink further.
According to the Nigerian News Agency, “Some of them still live in the denial of the present reality for their selfish gains.”
Also, the figures showed the parallel market rates for both the Pound Sterling and the Euro single currency are lower than the Bureau De Change rates. Meaning, the CBN efforts at overhauling the parallel market is beginning to manifest as the Bureau De Change operators will start experiencing more patronage as they now offer better rates.
Naira Devaluation Pushed Exchange Rate to N500/US$ at Black Market
Naira to United States Dollar exchange rate plunged to N500 on Monday after the Central Bank of Nigeria (CBN) devalued the Naira by N6 on Friday amid growing scarcity.
At the current rate, the local currency has lost N140 per US dollar when compared with N360 it was sold in the same month of 2019 and N5 compared to N495 it exchanged on Friday.
In an effort to ease pressure on the nation’s foreign reserves and unify foreign exchange rates in line with the International Monetary Fund and the World Bank’s requirement for loans, the CBN devalued the official exchange rate by N6 from N379/US$ to N385/US$ and directed bureau de change operators to sell at N392/US$, up from N386/US$.
However, with importers and businesses looking to meet the usual high demand for goods in December pushing demand for the United States dollar off the roof, Naira’s value has continued to plummet despite efforts by the CBN to prop up its value.
Against the British Pound, the Naira declined to N650, down from N620 it exchanged last week. This depreciation continues against the Euro common currency as the local currency declined to N585.
Lack of liquidity due to the weak foreign reserves, low oil prices and weak demand for the commodity amid production cuts by OPEC and allies is hurting CBN’s ability to effectively intervene at the nation’s foreign exchange markets.
The apex bank usually sells forex to dealers to ease scarcity and facilitate trades. However, lack of foreign revenue generation has forced the CBN to reduce its weekly forex sales to $10,000 per bureau de change operator despite reopening of the economy pushing demand for forex further up.
Again CBN Devalues Naira by N6 Ahead of World Bank’s $1.5bn Loan Request
The Central Bank of Nigeria (CBN) has once again devalued the Nigerian Naira by N6 to the United States Dollar, making it the third time the apex bank will adjust the Naira exchange rate this year.
The devaluation brings the CBN closer to actualising foreign exchange unification demanded by the International Monetary Fund (IMF) in April before the $3.4 billion loan was approved.
This same condition was enforced by the World Bank as a prerequisite for approval of $1.5 billion loan request submitted by the Federal Government. The loan the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, said she was positive it would be approved by the multilateral institution in the next meeting given that the Federal Government has met all the conditions for the said loan.
24 hours later, the apex bank devalued the Naira official rate by N6 from N379/US$ to N385/US$. While the International Money Transfer Service Operators (IMTOs), all authorised dealers, bureau de change operators and service providers were asked to add N6 across all rates.
The rate for IMTOs against the US dollar has now moved from N382 to N388. Meaning banks will now sell dollar to the CBN at N389, up from the previous N383 to us dollar.
Again, the Central Bank sale of dollar to the bureau de change operators was pegged at N390 to dollar, against the old N384 to US dollar.
The apex bank, therefore, directed the BDCs to sell at not more than N392 per dollar to end-users. The old rate was N386 to a US dollar.
The CBN circlar reads in part, “Weekly Exchange Rate For Disbursement of Proceeds of International Money Transfer Service Operators’ pegged IMTOs sale of dollar to banks at N388 to dollar; banks sale of dollar to CBN at N389 to dollar and CBN sale of dollar to BDCs at N390 to dollar. The BDCs are now expected to sale to end-users at not more than N392 to dollar and each BDC is entitled to buy $10,000 weekly”.
More Problem for CBN as Naira Approaches N500/US$ at the Black Market
Naira plunged against the United States Dollar to a record low of N495 at the black market on Thursday despite the Central Bank of Nigeria saying it has enough financial means to meet forex demands.
The Naira declined by N12 from N483 it exchanged on Monday amid persistent scarcity and high demands by importers and businesses looking to offset COVID-19 losses with the usual December high demand sales.
Godwin Emefiele, the Governor of the Central Bank of Nigeria (CBN), on Tuesday blamed the wide foreign exchange rate at the black market on speculators and hoarders looking for personal gain at the expense of the nation.
He went on to caution experts using black market rates to analyse the local currency performance to stop and claimed that section of the forex only accounts for 5 percent of the nation’s total foreign exchange transactions.
While that might be true, it is also true that majority of manufacturers and businesses have turned to the black market for their forex needs in recent months, especially after it became obvious that the apex bank does not have enough liquidity to service the economy.
The nation’s foreign reserves has been battered by the weak oil prices and the continuous production cut by OPEC and allies to artificially support low prices. Nigeria’s foreign reserves is presently hovering between $35 billion and $36 billion after plunging from $45 billion attained in June 2019, according to the latest data from the Central Bank of Nigeria.
Against the British Pound, the Nigerian Naira depreciated by N15 to N635 from N620 it exchanged on Monday. Another indication of chronic forex scarcity as the local currency also plunged to N580 against the European common currency, the Euro.
The wide forex is expected to further weigh on the nation’s inflation rate and consumer spending this December.
On Tuesday, the apex bank left the interest rate unchanged at 11.5 percent and attributed the rising inflation rate to structural policies, the recent #EndSARS protest and a surging fuel price.
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