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Foreign Education and Healthcare Accounts for Heavy Demand of Dollar in Nigeria

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Godwin Emefiele - Investors King

The total amount of money spent on education and medical services abroad between 2010 to 2020 is more than Nigeria’s current foreign reserves of $39.51 billion, according to the latest report from the Central Bank of Nigeria (CBN).

The search for greener pastures is not a term new to Nigerians and for many reasons, Nigerians travel from country to country seeking better lives for themselves. However, according to a report by the Central Bank of Nigeria, this search for better lives is facilitating the fall of Nigeria’s local currency in the exchange market.

According to the apex bank’s Balance of Payment report, Nigerians spent a total of $39.66bn on foreign education and healthcare-related services between 2010 and 2020.

The report further broke down the figures to reveal that Nigerian parents/guardians spent $28.65bn on foreign education while Nigerians spent $11.01bn on healthcare services in foreign countries. This is more than Nigeria’s foreign reserves of $39.51 billion.

Investors King observed the implication of this figure in the CBN report titled  “A Simple and Factual Explanation of Nigeria’s Exchange Rate Dynamics.

The value of the US Dollar in Nigeria is determined by the force of demand and supply, and with the number of Nigerians studying abroad, the demand for the U.S Dollar has increased exponentially while supply remained low due to a series of structural issues like weak foreign revenue generation, tough business environment, and poor economic policy.

The report noted that the number of foreign exchange requests received by Nigerian Banks is mostly for Primary and Secondary education from neighbouring countries while revealing that between 1998 and 2018, the number of Nigerians studying abroad increased from 15,000 to 96,702.

Also, the CBN report also disclosed that the demand for the dollar had exceeded its supply by about $18.45bn while also revealing that oil export – which accounts for over 90 percent of Nigeria’s foreign exchange earnings – had fallen from $93.89bn in 2011 to $31.4bn in 2020.

The Naira, has, however, maintained a bit of stability over the past month owing to a number of policies that the CBN has introduced. Although this doesn’t take away the fact that the currency is struggling in the exchange market and one way to curb this or reduce this is for Nigerians to establish commodities in products and services that the rest of the world will be willing to buy, which will, in turn, churn in the supply of dollars into the Nigerian economy.

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Naira

Nigeria Hits Historic High as Currency in Circulation Surges to N3.69 Trillion

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naira

Nigeria’s currency in circulation surged to a historic high of N3.69 trillion, according to data released by the Central Bank of Nigeria (CBN).

This figure represents an increase of N43.07 billion or 1.18 percent from the total of N3.65 trillion reported in January 2024 and a 13.64 percent year-on-year rise from N3.25 trillion reported in February 2023.

Currency in circulation encompasses the physical cash, including paper notes and coins, actively used in transactions between consumers and businesses within the country.

The latest statistics indicate a considerable uptick in the availability of cash within the Nigerian economy.

The surge in currency supply comes amidst lingering concerns over a potential cash crunch following the monetary policy adjustments by the CBN, particularly the aggressive tightening stance of the Monetary Policy Committee (MPC).

Analysts attribute this spike to various factors, including the fear factor stemming from the cash crunch experienced in 2023 and lingering uncertainties surrounding the administration of physical currency.

Despite the surge in currency in circulation, Nigeria’s economic growth remains sluggish, with projections indicating growth rates of around 2.9 percent to 3.1 percent for 2024.

Also, inflation remains a significant concern, with the headline inflation rate climbing to 31.70 percent in February 2024 from 29.9 percent reported in January 2024, according to data from the National Bureau of Statistics (NBS).

The CBN’s proactive approach to monetary policy, including a historic increase in the monetary policy rate (MPR) to 24.75 percent, underscores the central bank’s commitment to addressing economic challenges and fostering stability amidst persistent pressures.

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Naira

Nigerian Naira Surges to N1,350 per Dollar in Parallel Market

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New Naira notes

The Nigerian Naira has appreciated to N1,350 per dollar in the parallel market, a significant gain from its previous rate of N1,430 per dollar just a day earlier.

Similarly, in the Nigerian Foreign Exchange Market (NAFEM), the naira strengthened to N1,382.95 per dollar, indicating an upward trend across key forex segments.

Data from FMDQ revealed that the indicative exchange rate for NAFEM fell to N1,382.95 per dollar from N1,408.04 per dollar on the previous day, representing a gain of N25.09 for the naira.

This surge in the naira’s value has widened the margin between the parallel market rate and NAFEM to N32.95 per dollar from N21.96 per dollar previously.

Analysts attribute this impressive surge to recent foreign exchange reforms implemented by the Central Bank of Nigeria (CBN).

These reforms, including the consolidation of exchange rate windows and liberalization of the FX market, have contributed to bolstering the naira’s strength against the dollar.

The CBN’s proactive measures aim to promote stability, transparency, and liquidity in the foreign exchange market, fostering confidence among investors and strengthening the national currency.

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CBN Governor Reveals $2.4 Billion Forex Forwards Under Investigation

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Naira Exchange Rates - Investors King

Governor Yemi Cardoso of the Central Bank of Nigeria (CBN) disclosed that law enforcement agencies are currently investigating foreign exchange forwards valued at $2.4 billion.

This announcement came in the wake of the Monetary Policy Committee (MPC) meeting held in Abuja on Tuesday, March 26.

Governor Cardoso shed light on the meticulous forensic audit conducted on these transactions, which uncovered numerous discrepancies, rendering them ineligible for payment.

The CBN, while settling certain tranches of FX backlog, encountered transactions riddled with issues concerning their authenticity.

To address these concerns, Deloitte management consultants were enlisted to conduct a comprehensive forensic analysis spanning several months.

The audit revealed a multitude of irregularities, including allocations disbursed without corresponding requests, lack of proper documentation, and instances of outright illegality.

Cardoso emphasized the gravity of the situation, stating, “We refused to validate them because, apart from the fact that documentation was not satisfactory in many cases, they were outright illegal.”

He underscored the commitment of law enforcement agencies to investigate these transactions thoroughly.

Despite concerns about potential backlogs among stakeholders, Cardoso assured that the market remains open and transparent for addressing any outstanding contractual obligations.

The CBN has diligently verified and settled recognized backlogs of forward transactions.

This revelation comes at a critical juncture as Nigeria grapples with economic challenges, including inflationary pressures.

The MPC’s decision to raise the benchmark interest rate to 24.75 percent reflects efforts to stabilize prices and restore the purchasing power of the average Nigerian.

As investigations unfold and regulatory scrutiny intensifies, the CBN’s commitment to transparency and financial integrity will be closely monitored by stakeholders across the nation.

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