Saturday, October 23, 2021

    Naira’s value drops to N411.25/$1 on record low at official market after devaluation

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    Godwin Okafor
    Godwin Okafor is a Financial Journalist, Internet Social Entrepreneur and Founder of Naija247news Media Limited. He has over 16 years experience in financial journalism. His experience cuts across traditional and digital media. He started his journalism career at Business Day, Nigeria and founded Naija247news Media in 2010. Godwin holds a Bachelors degree in Industrial Relations and Personnel Management from the Lagos State University, Ojo, Lagos. He is an alumni of Lagos Business School and a Fellow of the University of Pennsylvania (Wharton Seminar for Business Journalists). Over the years, he has won a number of journalism awards. Godwin is the chairman of Emmerich Resources Limited, the publisher of Naija247news.

    Nigeria naira eases to a record low of 419.75 to the dollar on the official market on Friday in a currency devaluation as lenders quoted the market weaker in late trades, Refinitiv Eikon data showed.

    Meanwhile, the Central Bank of Nigeria (CBN) has removed the official exchange rate of N379 per dollar from its website.

    The Nigeria naira fell to a record low on the official market on Friday, with lenders quoting it 7.7% weaker against the dollar, following a currency devaluation aimed at unifying multiple exchange rates.

    The naira dropped to 419.75 per dollar, from its last trade at 381 on Monday, its last official session. The official market rate, backed by the central bank, has been stuck at 381 naira to the dollar for almost a year after two devaluations last year.

    No quotes have been available on the naira’s official rate since Tuesday.

    On the over-the-counter spot market , the currency traded at 410.65 naira against the dollar on Friday, and it was quoted at 483 on the black market .

    Nigeria operates multiple currency regimes, which frustrate businesses and have prompted calls from the World Bank for the rates to be unified to attract investment.

    Rising dollar demand has put pressure on the naira as providers of foreign exchange, such as offshore investors, exited after the COVID-19 pandemic triggered a fall in global oil prices.

    The World Bank has linked approval of a $1.5 billion budget support loan to currency reforms.

    The central bank has been trying to unify the rates and boost the dollar supply through direct interventions. It extended an incentive offer last week to recipients of dollar remittances to try to encourage more inflows from the Nigerian diaspora.

    Likewise, the International Monetary Fund (IMF) said exchange rate rigidities have constrained the economy’s ability to absorb external shocks.

    The IMF insisted that restrictions on access to foreign exchange for certain categories of goods, and multiple exchange rates create distortions in both private and public sectors decision making. They discourage long-term investment, encourage smuggling and provide avenues for corruption.

    Moving forward, the Fund suggested removal of foreign exchange restrictions, and a full exchange rate unification, in line with the authorities’ Economic Recovery and Growth Plan (ERGP), will help keep the parallel market premium low in a more sustained manner.

    It therefore called for unified exchange rate for the naira to promote growth and attractive foreign capital.

    According to the IMF, foreign exchange backlog and shortages are intensifying Balance of Payment (BoP) pressures insisting that exchange rate unification was imperative to reduce BoP risks. It said that fiscal deficit will stay elevated in the medium term, while additional domestic revenue mobilisation is required to reduce fiscal risks.

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