Expert Speaks On Naira To Dollar Exchange Rate as Banks Sell above N1,500/$ at Official Market

Expert Speaks On Naira To Dollar Exchange Rate as Banks Sell above N1,500/$ at Official Market

  • Despite recent efforts by the CBN, the Nigerian currency has once again depreciated against the dollar in the official market
  • The dollar was sold for as high as N1,500 to participants as the official market witnessed its biggest market activities
  • Bismark Rewane has provided insight into the naira's free fall and listed the various causes of Naira depreciation journalist Dave Ibemere has over a decade of experience covering Tech, Energy, Stocks, Investments, and the Economy.

Nigerian currency has depreciated against the US dollar in the official foreign exchange (FX) market after two sessions of positive performance.

Data from FMDQ securities showed that the naira closed against the US dollar at N1,433.89/$1 on Tuesday, February 7, 2023, at the Nigerian Autonomous Foreign Exchange Market (NAFEM).

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Naira to dollar exchange rate
Bismark Rewane is a renowned economist Photo credit: FDC
Source: Getty Images

This represents a 0.99% or N14.03 loss compared to Monday’s exchange rate of N1,419.86/$1.

Checks by further showed that some participants on Tuesday, February 6, paid as high as N1,519.78

The performance of the naira on Tuesday comes despite improved forex supply after recent moves by the Central Bank of Nigeria (CBN) to staunch infractions.

On Tuesday, the value of FX sales by forex traders in the official market increased by 5.7% or $25.16 million to $465.29 million from the $440.13 million reported on Monday.

This is the highest forex transaction recorded in a single day in over a year.

Naira to dollar against pounds, euro

Also, the domestic currency slumped against the pound sterling in the official market by N36.58 to end at N1,769.56/£1 compared to the N1,732.88/£1 it was sold at a day earlier.

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Meanwhile, against the euro, it fell by N35.85 to close at N1,477.98/€1 compared to the previous day’s N1,513.83/€1.

Naira to dollar at unofficial market

In the peer-to-peer (P2P) window, naira further declined against its American counterpart by N42 to trade at N1,479/$1, in contrast to Monday’s value of N1,437/$1.

In the same vein, the naira lost N20 against the dollar in the black market on Tuesday to quote at N1,460/$1 compared with the preceding day’s price of N1,440/$1.

Bismarck Rewane speaks on naira-dollar exchange rate

Providing insight into the fall of the naira, Bismarck Rewane, chief executive officer (CEO) of Financial Derivative, listed low foreign exchange (FX) inflow and the lack of confidence in the local currency as some of the factors responsible for the continuous decline of the naira.

The renowned economist said increasing interest rates, improving production as well as fixing the minimum wage are measures that should be considered to strengthen the naira.

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His words:

“Nigeria is one of those countries, which claims it has a managed-floating exchange rate. But in fact, it has a fixed exchange rate"
“This transition from what was the fixed exchange rate under the same period to what is now a managed floating rate, which is what it is trying to achieve, is what is causing these distortions.”

Other factors, according to Rewane, were the restrictions and exchange rate controls.

He added:

“We have the nonconvertible currencies which Nigerian exchange control. You have heavy restrictions and those are the things that cause distortion and take the currency away from its fair value and you have speculators that take things into consideration
“So why is the naira falling? One low supply of dollars. When do you have low dollars? Anytime when the supply is short, the price increases, that’s the economics.
“The loss of confidence in the currency as a store of value. People are now putting all their money in dollars or domiciliary accounts or taking them out.

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“It must be a store of value and people must have confidence in our currency. Increased naira speculation and fear because they are trading, some people are greedy, some are scared, and some are greedy and afraid.
"Then the restrictions and access control. Obviously, the more you have restrictions, the more you say to people, abokis and all, you are chasing shadows."

CBN governor plans next move for naira

Earlier, reported that the CBN was set to introduce a singular foreign currency (FCY) gateway bank.

The bank said the move would centralise all correspondent banking activities and facilitate international trade and economic activities.

The CBN also announced plan to streamline the number of BDC operators in Nigeria, improve the nation's forex inflows and stabilise the Naira.


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