Naira at record low after Osinbajo advised CBN on forex policy

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Naira notes, Counterfeit

Naira fell significantly against the dollar at the official market on Wednesday as it exchanged for N415.10 to $1, the lowest rate ever recorded in recent times.

This implies a N0.80 or 0.20 per cent devaluation from N414.30 per $1 rate it exchanged on Tuesday.

The black market rate appears to be dropping as well. The naira exchanged for N570 to $1, five naira lesser than the previous day.

The drop comes barely two days after Vice President Yemi Osinbajo urged the Central Bank of Nigeria (CBN) to have a “rethink” of its foreign exchange management policy.

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Vice President Yemi Osinbajo
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The Vice President sparked a forex conversation when he said Nigeria was operating an artificially low foreign exchange.

Speaking at Day 1 of the Mid-Term Ministerial Performance Review Retreat in the State House, Abuja, Prof Osinbajo said, “As for the exchange rate, I think we need to move our rates to [be] as reflective of the market as possible. This, in my own respective view, is the only way to improve supply.”

“We can’t get new dollars into the system, where the exchange rate is artificially low. And everyone knows by how much our reserves can grow. I’m convinced that the demand management strategy currently being adopted by the CBN needs a rethink, and that is just my view.

“Anyway, all those are issues that when the CBN governor has time to address, he will be able to address in full.”

He lamented the lack of access to forex for the importation of systems and raw materials as one of the contributory factors of the current economic situation, and said the CBN appeared to be in competition with government ministries and agencies in implementing certain policies.

Central Bank of Nigeria CBN logo naira dollar

The vice president on Tuesday responded to the criticisms, saying his call was not for the devaluation of the currency.

A statement by Laolu Akande, the VP’s spokesperson said, “For context, the Vice President’s point was that currently the Naira exchange rate benefits only those who are able to obtain the dollar at N410, some of who simply turn round and sell to the parallel market at N570.

“It is stopping this huge arbitrage of over N160 per dollar that the Vice President was talking about. Such a massive difference discourages doing proper business, when selling the dollar can bring in 40% profit!

“This was why the Vice President called for measures that would increase the supply of foreign exchange in the market rather than simply managing demand,  which opens up irresistible opportunities for arbitrage and corruption.

“It is a well known fact that foreign investors and exporters have been complaining that they could not bring foreign exchange in at N410 and then have to purchase foreign exchange in the parallel market at N570 to meet their various needs on account of unavailability of foreign exchange.

“Only a more market reflective exchange rate would ameliorate this. With an increase in the supply of dollars the rates will drop and the value of the Naira will improve.

He added that, “The real issue confronting the economy on this matter is how to improve the supply of foreign exchange, but this will not happen if we do not allow mechanisms like the Importers and Exporters window to work.

“If we allow this market mechanism to work as intended, we will find that the Naira will appreciate against the dollar as we restore confidence in the system.

Within the past weeks, the exchange rate of the domestic currency and the dollar hovered around the range of N412.00 to N414.00 and above benchmark before clinching a new low of N415.10 on Wednesday.

Naira’s performance on Wednesday became significant as foreign exchange supply skyrocketed by 99.99 per cent with $306.77 million recorded as against the $153.39 million posted in the previous session on Tuesday.

The currency oscillated to an intraday high of N405.00 and to a low of N419.00 before closing at N415.10 per $1 at the close of business on Wednesday.

At the black market in Abuja and Uyo, dealers exchanged the naira within the range N568.00 and N570.00 to a dollar on Wednesday.