The naira has crashed further to its deepest fall, hitting N710/$1 on Wednesday at the parallel market, according to the rates published by exchange rate aggregator Aboki Forex.
The N710/$1 rate is a 6.7% crash from the naira’s N670/$1 position on Monday, worsening Nigeria’s inflation that was last pegged at 17.71 by the Nigerian Bureau of Statistics (NBS).
The Central Bank of Nigeria (CBN)’s policies and measures geared towards protecting the naira from hitting the bottom at the foreign exchange market have failed. There also appears to be no plan by the apex bank, which has taken to blame, to wedge the embattled currency from falling further.
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Last week, the CBN warned Nigerians using naira to purchase dollar to desist or be prosecuted. Nigerians opting to save their funds in dollar indicates the loss of faith in Nigeria’s economy and the CBN’s ability to save the naira.
In addition to apportioning blame, the central bank had gone after some players in the parallel market. Last year, it had prohibited the sale of foreign currency to bureau de change operators, accusing them of sabotaging the naira by selling foreign currencies above the approved price.
The decision brought further burden on the naira as it compounded the liquidity challenge that has spurred dollar scarcity in the country.
The BDCs, Nigeria’s major operators of the parallel market, were major sources of foreign currency supply to those who don’t have access to the CBN.
Since then, the exchange rate has fallen from around N501/$1 to over N700/$1.
Experts have repeatedly issued timely warning that measures being taken by the CBN governor, Godwin Emefiele, to protect the naira will breed disaster.
The naira’s ordeal has been partly attributed to the central bank’s excess printing of new notes since 2015. The apex bank has been accused of minting money in excess to lend to the federal government.
The Ways and Means Advance, an arrangement through which the federal government can borrow from the CBN, has illegally yielded about N20 trillion converted to long term (30-year) loans to the government.
The CBN Act prohibits it from giving more than 5% of the federal government’s previous year’s revenue.
Another factor that has been fingered in the naira’s downfall is fuel importation. The oil windfall is supposed to serve as a panacea to Nigeria’s liquidity crisis, but it has greatly been undermined by lack of functioning refineries in the country, which forces the government to import refined petroleum products – spending earned foreign currencies that should have boosted the country’s foreign reserve and dollar liquidity.
The naira has greatly lost its value in both the parallel market and the Investor and Export window. In March 2014 when Emefiele became the CBN governor, the naira stood at N164 at the I&E window, but has depreciated through devaluations to N430.
How do you catch a big stone falling down from the sky? That is the sort of situation we are currently in. What economic activity happened between Monday and today to effect the big drop in value? So everything is ultra speculative, and each announcement about drop in value brings further drop in value, and it goes on and on. We are specialists in self-destruction.
It’s already a terrible situation, so the best we can do is to manage the situation in the remaining few months. Nobody should expect any turnaround from this regime, it has nothing left to offer; we do not need to harm ourselves further.