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Naira Declines Against the United States Dollar to N475

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Rising demand for the United States Dollar amid persistent scarcity has further widened Nigeria’s foreign exchange rate at the black market.

The Nigerian Naira depreciated by N5 from the N470 it was exchanged against the United States Dollar on Friday to N475 on Tuesday at the black market despite the Central Bank of Nigeria’s official exchange rate remaining at N379/ US$ since August 2020.

The apex bank devalued the Nigerian Naira twice this year when oil prices plunged to a record-low during the peak of the COVID-19 outbreak. The local currency was first devalued from N306/US$ to N360/US$ before it was adjusted again to N379/US$ to halt the surge in capital flight by foreign investors looking to exit the local market and also accommodate the change in the nation’s macro fundamentals.

According to Johnson Chukwu, the Group Managing Director/Chief Executive Officer, Cowry Asset Management Limited, “All the major sources of foreign exchange inflow to support the country’s forex reserves have declined.

The drop in foreign revenue generation plunged Nigeria’s foreign reserves from $45 billion in June 2019 to $35.60 billion as of November 13, 2020. While foreign direct investment used to supplement dwindling reserves has dropped amid rising global risk and weak economic fundamentals.

These coupled with the drop in diaspora remittance, about $21 billion yearly, incapacitated central bank intervention ability across key forex windows and explained the reason for the persistent dollar scarcity.

Last week, Mr Bismarck Rewane, the MD/CEO, Financial Derivatives Company Limited, predicted that the Naira to United States Dollar exchange rate could hit N475 between November and December at the black market given the current situation.

This, he attributed to the weak oil prices, demand for the commodity and production cuts by OPEC plus to artificially support prices. He added that demand for the United States Dollar, due to reopen of airspace, economy and general activities, will surge and further hurt the central bank’s intervention prowess.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Forex

Nigeria’s Annual Remittance Inflow Estimated at $24 Billion -CBN

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The Central Bank of Nigeria (CBN) has started focusing on how to better harness Nigeria’s huge diaspora remittances as seen in recent foreign exchange policy geared towards stimulating growth and fast-tracking economic recovery with foreign inflows.

On Thursday, the apex bank said it adjusted forex policy to service the economy with diaspora remittances and curb the excesses of few unscrupulous forex dealers.

In an effort to boost remittance inflows and foster an environment that would enable faster, cheaper, and more convenient flow of remittances back to Nigeria, the Central Bank of Nigeria, on November 30, 2020, announced a new policy initiative, which would help to support these objectives,” Godwin Emefiele stated.

Speaking further, he said, “Given the estimated annual remittance inflow of close to $24bn, which could help in improving our balance of payment position, reduce our dependence on external borrowing and mitigate the impact of COVID-19 on foreign exchange inflows into the country, the CBN sought to find ways to support improved remittance inflows into the country through official channels.

Based on this premise, we analyzed data on IMTO inflows into the country over the past year, and through our investigations discovered that some IMTOs, rather than compete on improving transaction volumes and create more efficient ways for Nigerians in the Diaspora to remit funds, resorted to engaging in arbitrage arrangements on the naira dollar exchange rate, which to a large extent resulted in a significant drop in flows into the country. It also encouraged the use of unsafe unofficial channels, which also supported diversion of remittance flows meant for Nigeria, thereby undermining our Foreign Exchange management framework.

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CBN Forced Speculators, Hoarders to Sell Dollar Lower

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The Central Bank of Nigeria’s new forex policy has forced many speculators and hoarders at the Nigerian parallel market popularly known as the black market to start bringing out their forex at an even lower price.

The Naira to United States Dollar exchange rate moderated from N500 to N470 earlier this morning across the nation’s black market.

Similarly, the local currency exchanged at N620 to a British Pound, an improvement from N640 it was sold on December 1, 2020.

The story is not different against the European common currency as it gained slightly to N570, up from N580 it sold on Tuesday.

The improvements recorded against global counterparts was after the CBN directed that henceforth recipients of foreign remittance can now receive such fund in foreign currency (US Dollar) in cash or through an ordinary domiciliary account.

This means the apex bank planned to inject $20 billion estimated diaspora remittances per year into the real sector of the economy to force hoarders to sell their dollars or lose substantially and also to curb forex dealers in the habit of buying forex directly from the recipient’s domiciliary account because of old CBN policy that restricted them from withdrawing foreign currency in cash.

With this old policy out of the way, recipients of foreign remittances can now withdraw foreign currency and exchange it at any of the registered bureau de change operators across the nation at N392 to a US dollar. The bureau de change rate set by the central bank.

Investors King expects the policy to fast track the recovery process and enhance economic activity across the board, especially at a time when importers are looking for forex to bring in goods in order to meet the usual December high demand.

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Naira Exchange Rate Improves as CBN Plans to Flood Economy With $20 Billion Diaspora Remittances

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The Naira to US Dollar exchange rate improved by N10 to N490 on Tuesday following the Central Bank of Nigeria’s new directive that allows recipients of diaspora remittances to receive their fund in foreign currency (US Dollar) or via their ordinary domiciliary account.

The move was after the apex bank blamed the parallel market for the wide foreign exchange rate and cautioned analysts for using speculative rates as the real Naira/US dollar rate.

Therefore, the apex bank decided to inject $20 billion annual diaspora remittances into the real sector of the economy and hurt the activities of unscrupulous individuals at the parallel market.

Investors King expects this to gradually moderate the nation’s foreign exchange rate against global counterparts, deepen business activities and fast track economic recovery.

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