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Abolish Dual Forex Rates, Economists, Manufacturers Tell CBN

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  • Abolish Dual Forex Rates, Economists, Manufacturers Tell CBN

Economists and manufacturers have joined the call for the abolition of the dual exchange rate policy operating in Nigeria, adding that it is a breeding ground for corruption.

They suggested floating of the naira so that everybody could buy the dollar at the same rate.

A leading manufacturer who declined to be named told our correspondent that the system of dual exchange rate was a very corrupt one that made millionaires out of a few Nigerians and impoverished many.

He said experience had taught him that the dual exchange rate regime was fraught with corruption.

“Since most people want to access forex at the official rate, there is usually a long queue that lasts for months, but you can avoid this hurdle by parting with a percentage of the money you want to access,” he said.

A key operator in the manufacturing sector, Chief Eric Umeofia , accused the CBN of exploiting the dual forex regime to allocate forex to cronies of the bank and importers of frozen fish while local manufacturers were forced to buy dollars at exorbitant black market rates.

He supported the claim with documents showing forex utilisation from one of the commercial banks.

Recently, the Attorney General of the Federation, Mr. Abubakar Malami, was reported to have observed some irregularities in the CBN’s forex allocations.

The apex bank had defended the discrepancies by explaining that they were typographical errors from the commercial banks who published the allocations.

A former CBN governor and the Emir of Kano, Alhaji Muhammadu Sanusi, had argued that no economy could thrive with dual/multiple forex rates.

A professor of Economics from the University of Uyo, Professor Leo Ukpong, also advised against the practice of maintaining a dual forex exchange rate.

He said, “Dual exchange rate regime creates room for illegal profit making by those who have access to buy at the lower (the CBN official rate) and turn around to sell at the high (parallel market) rate.

“This practice ends up increasing the cost of the FX to legitimate businesses that play by the rule; increases the cost of consumer goods to the larger population; causes the FX shortages due to hoarding; and distorts the true value of exchange rate.

“The CBN cannot design or implement any efficient or meaningful foreign exchange policy until we get rid of dual (or multiple) exchange rate regime.”

Also, a recent article by Bloomberg attributed the nation’s current woes to the dual forex regime, noting that it had refused to allow its currency to trade at its market value.

The article titled, “A tale of two currencies: Egypt sets itself apart from Nigeria,” drew a comparison between Nigeria and Egypt, two countries who were in the same situation in early November, crying out for dollars to revive their sinking economies and trying to curb rampant currency-trading on the black market.

According to the report, Egypt’s strategy was to ditch a currency peg, leaving its pound open to market forces.

It read in part, “Egypt is still short of dollars, but the situation is changing, and investors are gradually returning.

“Nigeria, in contrast, isn’t letting the naira trade at its market value, insisting that is the only way to protect the poor from a further surge in inflation, which is already at the highest level since 2005. Traders argue that it’s left the currency overvalued and say they’ll avoid Nigerian local markets until it weakens.”

It added that Egypt’s strategy had caused the Egyptian pound to gain 16 per cent against the dollar even as the naira fell 40 per cent in value against the greenback.

An economic strategist with the Manufacturers Association of Nigeria, Mr. Ambrose Oruche, supported floating of the naira, saying, “Allow naira to find its level. It will allow for more supply because there will be free entry and exit. More people will come into the market to trade. In the short run, there will be inflation but it will eventually ease off.

All the efforts geared at protecting the naira can only have a short-term effect, it is not sustainable. The naira will still lose value in the long run while the cost of living for the ordinary man continues to go up.

The National Bureau of Statistics in its January report stated that the inflation rate had gone up to 18.72.

Currently, the prices of consumer goods, according to the Chairman, Ikeja Shop Owners’ Association, Mr. John Okonkwo, increase on a daily basis.

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 long experience in the global financial market.

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Forex

Naira Continues Downward Trend on Black Market, Trades at N465/$

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Nigeria 500 naira notes

Naira Extends Decline on Black Market, Exchanges at N465/$

Naira extended its decline against the United States dollar on Friday as scarcity amid devaluation persists.

The local currency lost N2 against the US dollar from N463 it traded on Thursday to N465 on Friday. Its lowest in almost three years.

Similarly, the Naira depreciated by N3 against the British Pound from N562 on Thursday to exchange at N565 on Friday.

While against, the European common currency, the Nigerian Naira lost N1 from N505 it was sold on the back market on Thursday to N506 on Friday.

The local currency has been on a downward trend since the news of foreign exchange unification broke out about two weeks ago. This coupled with 5.54 percent devaluation from N360 official Naira-US Dollar exchange rate to N380, compounded Naira woes.

On the Investors and Exporters’ Forex window, the Naira appreciated by 25 kobo or 0.06 percent against the US dollar to trade at N386.50 on Friday.

Activity on the window, however, improved from $11.96 million traded on Thursday to $25.19 million Friday.

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Naira Declines Against Pound, Euro After Devaluation

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Naira Declines against pound

Naira Plunges Against Euro and Pound After CBN Adjusts Official Exchange Rate

Following the devaluation of the Naira by the Central Bank of Nigeria, the local currency declined against the British Pound and the Euro single currency on the black market.

The Naira lost N4 against the British pound to trade at N562 from the N558 it traded on Wednesday.

This decline continues against European common currency as the Naira lost N1 from N504 exchanged on Wednesday to trade at N505 on Thursday.

On the Investors and Exporters (I&E) Forex window, the Naira lost 0.06 percent or 25 kobo against the US dollar to trade at N386.75 after plunging to as low as N390 during the trading hours.

Activity on the I&E window declined by 86.4 percent from $103.37 million traded previously to $11.96 million as traded are reportedly stay off the market.

The FMDQ Group, who manages the I&E Fx window, on Wednesday adjusted its CBN’s Naira-USD official exchange rate from N361 on Tuesday to N381 despite the central bank maintaining N360/$ on its official website. Indicating that the apex back has officially implemented the N380 but without an official announcement, likely due to backlash — especially after the CBN has repeatedly said the nations have enough reserves to support the economy and blamed speculators and hoarders for the wide exchange of the local currency.

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Naira Slides to N463 Against US Dollar on Black Market

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Naira

Naira Falls Against Dollar, Trades at N463 on Black Market

The Nigerian Naira declined against the United States dollar on the black market following the decision of the Central Bank of Nigeria (CBN) to adjust the nation’s official foreign exchange rate.

The local currency depreciated by N2 against the US dollar from the N461 it exchanged on Wednesday to N463 on Thursday after the news of CBN adjustment became known.

The apex bank had adjusted the official foreign exchange rate from the N360 previously used for the US dollar to N380 due to the recent changes in macro fundamentals of the nation.

This is the Naira lowest exchange rate on the black market in almost three years and highlighted the nation’s precarious position especially when the escalating inflation rate of 12.4 percent is factored in.

On Tuesday, United Capital Plc said given current economic situation that the official exchange of the Naira is expected to slide to N430 to a US dollar by the end of the year.

The pan-African investment banking and financial services group said “On the exchange rate, we believe the odds are in favour of a further naira adjustment, which may take the official rate to N410/$ to N430/$ by year-end.

“However, we believe the Central Bank of Nigeria will continue to defend the value of the local unit for as long as it can.”

It went on to predict that the economy will shrink by 2.69 percent in 2020, down from the 2.3 percent growth predicted earlier in the year.

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