The Central Bank of Nigeria (CBN) has devalued naira in one of its currency auctions. Bloomberg reported that the development took place at an auction on Friday, where the central bank asked that bids for foreign exchange be made at N380/$1 against the $360/$1 that it used to be. Sources with the knowledge of the matter said the CBN is keeping the matter confidential for now.
Nigeria’s central bank devalued the naira at one of its currency auctions, according to people familiar with the matter.
The weakening comes after Governor Godwin Emefiele announced last month that the bank plans to unify its multiple exchange rates to improve the transparency of its currency-management system.
At an auction for importers on Friday, the central bank asked that bids for foreign exchange be made at 380 naira per dollar, compared with 360 previously, the people said, asking not to be identified because they’re not authorized to speak to the media. Isaac Okorafor, a spokesman for the central bank, didn’t answer calls to his mobile phone or reply to messages seeking comment.
It has been an interesting journey by the apex bank to stabilize naira since the outbreak of coronavirus that resulted in plummeted oil prices.
In March, the CBN devalued the naira, pegging the official rate at N360 from N307, though the apex bank’s governor, Godwin Emefiele said it’s only a technical devaluation. Multiple exchange rates have characterized the Nigerian money market and the central bank has been trying one policy after the other to keep the market stable.
In 2017, the apex bank introduced the nafex, a separate rate for investors and exporters that offers a stable exchange window for naira. The nafex window was designed to woo investors who have been scared away by the fluctuating exchange rates, and it has been stable around N388 since May when the oil price started showing signs of recovery.
The CBN introduced nafex as it was trying to avoid devaluing naira formally. But it has contributed to the multiple exchange rates obtainable in the country’s forex market. The parallel market has been repeatedly accused of hoarding the dollar in order to create artificial scarcity.
The International Monetary Fund (IMF) has warned Nigeria about multiple exchange rates, which it said creates confusion and spooks investors.
However, many believe that the CBN has been responsible for the instability of naira through its sharp practices.
Sahara Reporters reported on Thursday that the central bank has been hoarding the dollars remitted by Nigerians in Diaspora for dubious reasons, and cannot say the correct amount of foreign currencies that have been sent to Nigeria and exchanged with naira.
The report said that contrasting figures that have been put out, which drew the attention of concerned Nigerians, after the Secretary to the Government of the Federation, Boss Mustapha revealed in 2019 that remittances received by Nigeria stood at $19,6bn, $22bn and $25bn in 2016, 2017 and 2018.
Those who questioned the figures said more monies were remitted than what was revealed by the SGF, and accused the CBN of concealing the real figures.
“It is pertinent to let the public know that apart from hiding the fact that revenue from remittances are far more than oil revenue, all foreign aids and Foreign Direct Investment, the CBN wants to continue to sabotage the national economy through dubious regulations and that was why it banned banks and other foreign exchange dealers from paying foreign currencies to recipients of foreign remittances.
“Thus, by warehousing the dollar component of remittances in foreign banks, the CBN has made it impossible for the naira to appreciate against the dollar in the foreign exchange market.
“In view of the decision of the Federal Government to mobilize the huge diaspora remittances to serve as a catalyst for economic development in line with the provisions of the Nigerians in diaspora Commission Act, the CBN should be restrained from hoarding information on the money sent to the country by Nigerians living abroad,” a financial expert with knowledge of the matter told Sahara Reporters.
But the central bank said it had restricted financial institutions from issuing foreign currencies in order to help naira appreciate. However, the decision has failed to yield the expected result as naira has been on free-fall ever since the apex bank took the step, and has been repeatedly devalued.
Several forex policies of the CBN have been pointed at by critics as reasons for naira’s underperformance in the international monetary market. The bottom line remains that the IMF and investors’ admonition to Nigeria to have a unified exchange rate is far from a reality, and it is hurting the country’s businesses and chances for Foreign Direct Investments.