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.
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 $5 billion.
While the central bank has not updated the quote on its official website from N360 to N380 as shown below, it has started selling to investors and exporters at N381, up from the old N361.
Again, this explained why the Naira-USD exchange rate slid to N461 on the black market in the last two weeks and remained between N460-N462 ever since.
Naira Declines Slightly on the Black Market to N474/$
Naira Drops Marginally on the Black Market to N474 Against US Dollar
Nigerian Naira declined marginally on Tuesday on the parallel market, popularly known as the black market.
The local currency declined by N1 to N474 per US dollar, down from the N473 it traded on Monday.
This was coming after Shoprite announced it would be exiting Nigeria, Africa’s largest economy. The announcement further damped the nation’s economic outlook amid the already heighten economic uncertainties.
Nigeria continues to struggle with low dollar availability after low oil prices and weak global demand for the commodity eroded the nation’s foreign revenue generation.
On the Investors and Exporters Forex window, the Naira remained pressured at N389 to a US dollar, better than the N389.25 it exchanged on Monday but more than the N381 stipulated by the Central Bank of Nigeria.
Total turnover traded by investors rose from $18.83 million traded on Monday to $24.66 million on Tuesday.
Experts have said the series of bad news emanating from the country will continue to deter potential investors and hurt capital importation necessary to boost dollar liquidity.
Forex Scarcity Weighs on Manufacturing Sector
Manufacturing Sector Suffers from Lack of Dollar Liquidity
The Director-General, Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf, has said lack of dollar availability continues to weigh on the manufacturing sector in the first half of the year as the sector recorded its third consecutive month of contraction in the month of July.
According to Yusuf, several manufacturers had to source for forex on the black market, increasing scarcity on the already stressed section of the forex even more. This, other experts have blamed for the high Dollar-Naira exchange rate on the black market.
On Monday, the Naira was exchanged at N473 to a US dollar on the parallel market popularly known as the black market. The local currency gained N2 from the N475 it was exchanged before the Sallah holiday to N473 on Monday when the market opened.
“Across, practically, all sectors, we are experiencing cost escalation, loss of credit lines enjoyed from foreign creditors, forex remittance challenges and many more. We need an urgent response from the CBN to calm the situation and restore confidence in our foreign exchange management framework,” Yusuf stated.
The Lagos Chamber of Commerce and Industry said most of its 2,000 members have been hit by the dollar shortage and wide foreign exchange rate that is presently eroding their profits.
“If the situation persists, it will lead to lay-offs. If you are not producing, there will be a shortage of goods in the market, prices will go up,” he added
Naira Gains N2 Against US Dollar to N473 on Black Market
Naira Gains Against Dollar to N473 on Black Market
The Naira gained slightly on the parallel market, popularly known as the black market, on Monday to exchange at N473 per US dollar.
The local currency traded at N475 to a US dollar on Friday before gaining N2 to N473 on Monday.
This is coming on the back of dollar scarcity caused by falling foreign reserves and low oil prices.
Against the British Pound the local currency declined by N5 from N585 it traded on Friday to N590 on Monday.
This continues against the Euro single currency as the Naira depreciated by N2 to N542, down from N540 it traded on Friday.
On the Importers & Exporters Forex window, the Nigerian Naira exchanged at N389.25 against the United States dollar, slightly below the N388.33 it opened on Monday.
Investors traded $18.83 million during the trading hours of Monday on the I&E FX window.
The Central Bank of Nigeria’s exchange rate remains N381 to a United States dollar.
The apex bank had adjusted the local currency foreign exchange rate twice in the last few months to ease the pressure on the nation’s dwindling foreign reserves.
Still, the inability of the apex bank to improve the supply of the US dollar into the economy continues to weigh on the Naira value and general economic activities.
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