The Central Bank of Nigeria, CBN, yesterday devalued Naira from N461 to N630 to a dollar at the importers and Exporters window. This is coming barely two days after President Bola Tinibu revealed his plan to unify the country’s exchange rate to stimulate the economy of the country. During his inaugural speech on 29th May, president Tinibu said, “Monetary policy needs a thorough house cleaning. The Central Bank must work towards a unified exchange rate. This will direct funds away from arbitrage into meaningful investment in the plant, equipment, and jobs that power the real economy.”
In the former president Buhari administration, there was a disparity in the exchange rate between the Import and Export window and the parallel market, a situation that encourage those close to power to engage in round-tripping business through using Bureau De Change operators in the country.
The round tripping had thrown some businesses to suffer as the CBN could not track down the perpetrators to book.
On 30th May, a day after his inauguration, president Tinibu hold a strategic meeting with top executives of the CBN and the Governor to iron out how the country will be delivered from the financial clutch.
Shortly after the meeting, both the presidency and the CBN kept mute to the pressmen, however, a source in the presidency disclosed the meeting was about how the apex bank will harmonize the exchange rate in the country.
On the same day, the Group Managing Director of the Nigerian National Petroleum Company Limited, NNPCL, Mallam Mele Kyari also met with President Tinibu to fine-tune the processes of the subsidy removal.
The following day as the apex bank resume its bidding the forex was sold to customers at N631 to a dollar and was given full of their bidding.
Consequently, a survey at the parallel market yesterday revealed that the exchange rate has dropped from n750 to N745 following the market forces.
Right from the day President Tinibu takes over; the Naira continued to weaken steadily.
Unlike the past administration, the market arbitrage (difference between the official and parallel markets) has widened in the past three years from N100 per dollar or about 30 percent in 2020 to over N400 per dollar (above 100 percent) sometime last year when the black market rate spiked to N880/$.
The unhealthy margin in the capital market has made Development institutions like the International Monetary Fund (IMF), worry that exchange rate differential in excess of five percent could trigger unhealthy manipulation that could negatively affect other efforts on market stabilization.
The Financial Stability in its Report publication of the CBN, revealed that the apex bank sold $9.2 billion in the market in the first half of last year.
