Naira Nearing N1000/1$: Growing Concerns Amid CBN Investigation

The value of Nigeria’s currency, the Naira, has been plummeting against the US Dollar.

This decline is particularly concerning given the recent decisions by the Central Bank of Nigeria (CBN) and the subsequent impact on Africa’s largest economy.

Since the CBN chose to liberalize the forex market on June 14, the Naira has taken a hit, moving from N750/$1 to a staggering N950/$1 by August 14, 2023.

Check: CBN Dollar to Naira 15 Aug

The rate of this decline has created alarm as the difference between the official exchange rate and the parallel market (also known as the black market) keeps growing. This growing gap, now at N181, negates the very purpose of CBN’s choice to float the Naira.

Contributing Factors

Several elements have played into the devaluation of the Naira:

• CBN Probe: The current investigation into the apex bank, led by special investigator Jim Obazee and sanctioned by President Bola Ahmed, might be accelerating the Naira’s fall.
• Financial Status: The CBN’s recent financial statement reveals an owed sum of $7.5 billion to renowned institutions JP Morgan and Goldman Sachs. With the foreign reserve at only $33.88 billion, this debt is a notable factor in the ongoing forex crisis, says Prof Uche Uwaleke, an economist.
• Undocumented Forex & Unregulated Market: The acting governor of the CBN, Folashodun Shonubi, points towards undocumented forex remittance and an unchecked parallel market as main contributors to the current crisis.

The significant reliance of Nigeria’s economy on fuel means it is further strained due to the forex crisis. Oil marketers are even hinting at possible fuel price hikes due to the rising Dollar rate. This hike would directly impact the general population, who are still grappling with the recent fuel increment.

Opinions from the Sector

Aminu Gwadabe, the president of the Association of Bureau De Change Operators of Nigeria (ABCON), argues that their members are not responsible for the forex market crisis.

Instead, he highlights the rampant unlicensed online platforms which operate without uniform regulations, thus bypassing the official market.

His suggestion? “To streamline remittances from abroad and bolster the official market, the BDCs should be made the sole agents of diaspora remittances.”

Idakolo Gbolade, the CEO of SD & D Capital Management, ties the ongoing depreciation of the Naira to a decrease in forex inflows, causing a scarcity in foreign currency.

He accuses major oil firms and banks of furthering the forex crisis for their gains.

Conclusion

There’s an urgent need for the government to reevaluate its policies, ensuring the CBN can effectively monitor the forex market.

The ongoing instability in the sector can result in increased inflation and a higher cost of living, adversely impacting the population.

As the Naira continues its decline, all eyes are on the Central Bank and the federal government for a solution to curb the crisis