Economy

FG Devalues the Naira Again to Attract Foreign Investors, Unify Official, Parallel Markets - Report

Updated Monday, February 05, 2024 at 7:43 AM by Pascal Oparada

The Nigerian government reportedly devalued the naira to bring the official rate closer to the black rate
FMDQ exchange changed the methodology used to calculate the forex rate, moving the naira from N900 per to N1,500
The move was introduced as a measure to attract foreign investment into the country

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Pascal Oparada has over a decade of experience covering Tech, Energy, Stocks, Investments, and Economy.

The Nigerian government has reportedly devalued the naira for the second time in eight months as it battles to clear up the chaotic exchange rate and woo foreign investors.

The naira sharply declined in value in the last week of February 2024 in both the official and parallel markets after FMDQ changed the methodology used to calculate the official exchange rate, taking it closer to the black market rate.

Reform meant to attract investors

The move is seen as a market-friendly reform introduced by President Bola Tinubu, who floated the naira immediately after he became president in May 2023.

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According to reports, the new methodology moved the official exchange rate from N900 to about N1,500 per dollar.

Analysts believe the current rate is way above the free-traded rate, making it more expensive for international companies to invest in Nigeria.

Financial Times reports that FMDQ announced the revision of the exchange rate to address recent fluctuations and challenges in the forex market.

The exchange subsequently suspended the publication of exchange rates on Friday, January 26, 2024.

The revised rate system will ensure that rates accurately reflect market conditions and uphold price formations and transparency, FMDQ said.

Naira crashes after devaluation

The naira declined by 40% to N1,485.57 per dollar on the official market on Tuesday, January 30, 2024, and as low as N1,531 on Wednesday, January 31, 2024.

The move took the naira above N1,475 to the dollar traded in the black market.

However, the Central Bank of Nigeria (CBN) warned authorised dealers reporting inaccurate and misleading information to desist, stating that the behaviour does not align with ethical standards associated with a sound financial market.

The development comes amid threats by CBN to commercial banks still holding excess forex. The apex bank asked the banks to offload extra dollars in their possession to help the naira stabilise against the dollar.

Naira recovers in official, black markets

Legit.ng reported that following the February 1, 2024, deadline for commercial banks by the Central Bank of Nigeria to sell all excess foreign exchange holdings, banks on Thursday, February 1, 2024, made efforts to sell their surplus dollar stocks.