Nigeria’s Currency Experiences Significant Rise as Central Bank Takes Major Actions Against Forex Dealers
Nigeria’s Central Bank has chosen to reduce the number of permitted forex traders in the nation. Over 2,000 operators have lost their rights to trade as the Bank continues to strive to strengthen the local currency.
In 16 years, the count of forex traders has skyrocketed over 5,000, many of whom were authorized under the previous Central Bank Governor, Godwin Emefiele.
Central Bank of Nigeria Cuts Back on Approved Forex Traders
On Tuesday, July 18, 2023, the Central Bank of Nigeria (CBN) published an updated roster of authorized forex traders, or Bureau de Change (BDC) operators, on their website. The document, aptly titled “Approved BDCs”, unveiled that 2,698 BDC licenses had been revoked.
Legit.ng noted that the current total of approved BDC operators in the country stands at 2,991, a significant drop from the previous number of over 5,000.
The Central Bank’s Effort to Fortify the Naira
Since President Bola Ahmed Tinubu took the office, the Central Bank has introduced several strategies to reform the exchange rate, including allowing the local currency to float freely.
This was aimed to bolster the Naira, which has unfortunately not delivered the expected outcomes so far.
Forex traders have become a major influence on the value of the Naira compared to foreign currencies in recent years. The number of operators skyrocketed from a mere 74 in 2005 to 5,689 in 2021.
The massive increase in traders has distorted the market, making it more challenging for the Central Bank to address the Naira’s devaluation. Tinubu’s new financial advisors recently produced a document titled “Policy Advisory Council Report: National Economy Sub-committee”.
It suggested major changes, including raising the required capital for forex traders.
The committee also recommended allowing Nigerian banks to serve as the main suppliers to the forex market.
The Naira’s Impressive Uptick
On Tuesday, July 18, 2023, the Nigerian currency experienced a significant surge in the official foreign exchange market.
Data from FMDQ reveals that the Naira closed at N742.93 per dollar on Tuesday, showing an impressive 6.58% increase from Monday’s exchange rate of N795.28 per dollar.
A report indicates that the improvement seen on Tuesday represents the largest single-day gain in the official market in over four years.
Aliko Dangote’s Wealth Takes a Hit Due to Naira Devaluation
In a separate report, Aliko Dangote, a prominent Nigerian billionaire, experienced a notable loss of over N1.4 trillion in his fortune following the devaluation of the Naira.
The Central Bank’s efforts to consolidate the country’s multiple exchange rate systems caused this devaluation. Most of Dangote’s investments, which constitute a large part of his wealth, are located in Nigeria.
As a result, fluctuations in the Naira’s value directly impact his fortune.
The Central Bank’s actions against forex dealers and the subsequent rise of the Naira demonstrate the complexities and ripple effects of economic policy decisions.
While some parties, such as Dangote, may face losses, the overall aim is to stabilize and strengthen the Naira, potentially benefiting the wider Nigerian economy.
As these events unfold, the Nigerian public and the world at large will continue to watch closely.