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CBN Devalues Naira Again, Official Rate Now N381/$ on the I&E Forex Window

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Naira - Investors King

CBN Devalues Naira by 5.54% Against the US Dollar

The Central Bank of Nigeria (CBN) has devalued the Nigerian Naira once again, according to the available data on the FMDQ Group.

The apex bank devalued the local currency by 5.54 percent from N361 to N381 against the United States dollar, making it the second time in the last six months that the Naira would be devalued to commodate the change in economic fundamentals and the nation’s dwindling revenue generation.

CBN official rate

The apex bank first devalued the Naira by 15 percent in March following more than 60 percent decline in global oil prices and substantial depreciation in the nation’s foreign reserves due to COVID-19 disruption.

This coupled with Nigeria’s weak fiscal buffer weighed on the nation’s economic outlook as experts, investors and businesses immediately started projecting that at some point the apex bank would be forced to devalue the local currency again.

However, despite the central bank calling them speculators and hoarders with one motive, to profit from the nation’s economic situation. They insisted that with crude oil projected to remain between $35 to $45 per barrel through 2021 and foreign reserves already weak at $36.151 billion in a nation where over 90 percent of what its citizen consumes are imported, the apex bank will lose its ability to intervene at the nation’s foreign exchange, especially with foreign investors looking to move out about $5 billion.

While the central bank has not updated the quote on its official website from N360 to N380 as shown below, it has started selling to investors and exporters at N381, up from the old N361.

CBN 1

Again, this explained why the Naira-USD exchange rate slid to N461 on the black market in the last two weeks and remained between N460-N462 ever since.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Forex

Zimbabwe Urged to End Dollar Dependence, Boost Local Currency

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U.S dollar - Investors King

Zimbabwe must take decisive steps to reduce its reliance on the US dollar and promote the use of its own currency, according to Information Secretary Nick Mangwana.

In an opinion piece published in the Herald newspaper, Mangwana outlined the urgent need for de-dollarization to achieve economic sovereignty, stability, and growth.

“The benefits of de-dollarization far outweigh the costs, making it an urgent imperative for Zimbabwe to break free from the US dollar grip,” Mangwana asserted.

His call comes as more than 80% of the nation’s transactions are currently denominated in dollars, a situation exacerbated by the lifting of a ban on the US currency at the start of the coronavirus pandemic in March 2020.

This move was initially intended to ease an acute shortage of foreign exchange.

Mangwana said reducing reliance on the greenback is a critical step toward regaining economic control.

“De-dollarization will help promote our local currency and diversify the country’s reserves,” he said.

By encouraging the use of the Zimbabwean dollar, the country can work towards stabilizing its economy and fostering sustainable growth.

The push for de-dollarization is part of a broader economic strategy. Last week, President Emmerson Mnangagwa hinted that Zimbabwe’s bullion-backed Zimbabwean dollar (ZiG), its sixth attempt in 15 years to establish a stable currency, may become the sole legal tender before 2030.

This move is seen as a long-term solution to the ongoing currency instability.

Mangwana’s advocacy for de-dollarization reflects a growing consensus among government officials that economic independence is vital for Zimbabwe’s future.

“Reducing our dependence on the US dollar will not be without challenges, but the long-term benefits are undeniable,” he said.

The transition to a more self-reliant economic model is expected to involve significant policy changes and strategic planning to ensure a smooth and effective implementation.

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Nigeria’s Foreign Reserves Rebound to $35.05bn Under Tinubu Administration

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Forex Weekly Outlook March 6 - 10

Nigeria’s foreign reserves climbed to $35.05 billion as of Monday, according to the latest data from the Central Bank of Nigeria (CBN).

This represents a significant recovery to levels not seen since the early days of President Bola Tinubu’s administration.

The current reserve level represents a return to the $35 billion mark last recorded on June 2, 2023, when it stood at $35.02 billion. A day after President Tinubu’s inauguration, the reserves were reported at $35.09 billion.

Since then, Nigeria’s foreign reserves have fluctuated, frequently falling below the $35 billion threshold.

The reserves dipped to a low of $32.11 billion on April 19, prompting speculation about the CBN’s intervention in the currency market to support the naira.

The naira, which was officially floated on June 14, has lost approximately 70 percent of its value against the US dollar since the market segments were harmonized.

Despite these challenges, the recent rise in reserves indicates a positive trend. In response to concerns about market intervention, CBN Governor Dr. Olayemi Cardoso said the apex bank is committed to a market-driven approach.

“We encourage a willing buyer, willing seller dynamic and aim for minimal central bank intervention, except in very unusual circumstances,” he said during the last IMF Spring meeting.

The Monetary Policy Committee (MPC) of the CBN has also highlighted the importance of improving liquidity in the foreign exchange market.

Personal statements from the committee’s 295th meeting in May, recently published on the CBN’s website, reflect a focus on maintaining a vibrant currency market.

The MPC raised the Monetary Policy Rate (MPR) to 26.25 percent while retaining other policy parameters.

Since the April low, Nigeria’s foreign reserves have appreciated by $2.98 billion, showcasing a significant recovery amidst ongoing economic reforms.

This rebound provides a measure of optimism for the nation’s economic stability, particularly as it grapples with the broader impacts of currency devaluation and inflation.

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Naira

Naira Plummets to Three-Month Low of N1,530 Per Dollar on Black Market

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New Naira notes

The naira has plunged to a three-month low of N1,530 per dollar on the parallel market, also known as the black market, amid renewed pressure on demand for the greenback by end users.

This represents a 0.65 percent or N10 decline from the N1,520 rate quoted last Friday.

According to data from online sources and street traders, this is the weakest level since March 19, 2024, when the naira was quoted at N1,570 per dollar.

“The dollar’s value has risen due to increased demand from travelers and importers. Currently, we purchase dollars at N1,520 and sell them at N1,530,” a street trader stated in Lagos.

On the official Foreign Exchange (FX) market, however, the naira saw a slight gain.

It appreciated by 0.70 percent on Friday, closing at N1,509.67 per dollar compared to N1,520.24 on Thursday, according to data from the FMDQ Securities Exchange Limited.

Despite this appreciation on the official market, the parallel market continues to experience significant volatility.

The dollar supplied by willing buyers and sellers decreased by 32.64 percent, falling to $116.88 million on Friday from $173.51 million recorded on Thursday. This drop in supply further exacerbates the pressure on the naira in the parallel market.

The intraday high on Friday closed at N1,535 compared to N1,550 on Thursday, while the intraday low was quoted at N1,450 on Friday, down from N1,430 on Thursday.

Economic analysts suggest that the disparity between the official and parallel market rates indicates underlying issues in Nigeria’s foreign exchange management and economic policies.

The continuous demand for dollars by travelers and importers highlights the challenges faced by the Central Bank of Nigeria (CBN) in stabilizing the naira.

As the demand for the dollar remains strong, the naira’s depreciation could have far-reaching effects on the economy, including increased inflation and higher costs of imported goods.

The CBN may need to implement additional measures to address the ongoing demand and supply

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