Another Naira Devaluation as Naira Declines to N410.25 Against United States Dollar on I&E FX Window
Nigerian Naira declined against the United States Dollar on the Importers and Exporters (I&E) Foreign Exchange Window on Thursday in another suspected devaluation move by the Central Bank of Nigeria given the nature of the exchange platform.
The I&E FX Window is the only foreign exchange trading segment that allows investors, exporters and end-users to trade forex at a market-determined exchange rate.
However, because the Central Bank of Nigeria (CBN) intervenes at the window intermittently to manage the foreign exchange rates, the exchange rate at the window is largely regulated and pegged at a certain range against what is obtained at the parallel market or black market.
Therefore, the sudden plunged in Naira value from N392.88 against the United States Dollar on Thursday to as low as N412.05 before moderating to N410.25 per US$ raised eyebrows given the Central Bank of Nigeria’s extensive involvement.
Experts are already predicting the fourth devaluation in the last one year and the very first in the new year factoring in CBN modus operandi, economic recession, falling foreign revenue, weak fiscal buffer and generally low economic productivity.
Also, this may not be unconnected with the rising capital outflow from the nation’s foreign exchange market, especially given the huge profit realised from the Nigerian Stock Exchange in 2020.
A recent report from the Exchange revealed that foreign investors withdrew N433.15 billion between January and November 2020 while only investing (foreign inflow) N226.13 billion during the same period. Meaning, CBN may have devalued the Naira at the I&E window to curb January’s expected capital outflow by foreign investors that profited big from the nation’s over 50 percent gain in 2020. The highest globally.
