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NairaWatch: Naira Crashes to N590 Per Dollar

NairaWatch: Naira Crashes  to N590 Per Dollar amid heightened fears of devaluation



Unity Bank NairaWatch, Naira and Dollar

Nigeria’s currency, the naira, fell across the markets to hit a recent low of N590 per dollar as a trudging fear of devaluation and distrust of the Central Bank of Nigeria (CBN’s) policies continued to haunt the Nigerian currency.

Foreign  exchange (forex) trading reports at the weekend indicated that naira depreciated at the official and parallel markets, despite accretion in national forex reserves. National forex reserves increased by $53.48 million to $39.71 billion.

At the CBN’s regulated Investors and Exporters (I & E) Window, the naira fell by 0.2 per cent to N417.50 per dollar. However, at the parallel market, where the majority of independent and retail end users source forex, the naira depreciated by 0.5 per cent.

At the I & E Window, total turnover declined by 14.7 per cent to $498.85 million, with trades consummated within the N410 and N453.15 per dollar band.

Most pundits expected further devaluation in naira, citing the country’s beleaguered forex earnings and inability of CBN’s policies to stimulate forex inflows.

Analysts at Cordros Group at the weekend said further adjustments in the naira-dollar peg closer to the fair value and flexibility in the exchange rate are significant to attracting foreign inflows.

According to analysts, foreign inflows, which have been disrupted by lack of global investors’ confidence in naira rate management  are paramount to sustained forex liquidity over the medium term as accretion to the national reserves will be weak given that crude oil production levels remain quite low.

Mr. Bismarck Rewane, member, Presidential Economic Advisory Council (PEAC), had taken a critical look at the naira management policies of the apex bank, rating them as “low” or uncertain in performance. Several independent analysts and finance and economic research firms share the same view.

According to him, recent policies taken by the apex bank to defend the nation’s currency in the forex market have yielded little or uncertain results.


He said the possibility of the success of the latest initiative by the apex bank, the N65 rebate per dollar scheme, is negative.

Assessing four initiatives taken by the apex bank, Rewane scored them between low, uncertain and no. These initiatives included the “Naira for dollar” scheme, import restrictions, scrapping of dollar sales to Bureau de Change (BDC) and the latest “N65 rebate per dollar” scheme.

According to him, the level of success of the “Naira for dollar” is “low” while the level of success of the imports restriction and scrapping of dollar sales to BDCs is “not sure”.

He said the current forex market dynamics raised enough doubts on the success of the latest “N65 rebate per dollar”, noting that the targeted audience of the policy may not respond favourably to the initiative.

He outlined that with exchange rate of about N580 per dollar at the parallel market as against N416 per dollar at the official market, the gap of N99 per dollar between the official and parallel market, even after adding the N65 rebate, is too attractive for exporters to ignore.

“Will exporters be willing to give up N99 per dollar out of patriotism? No,” Rewane, who is also Managing Director, Financial Derivatives Company (FDC), stated, in his latest review.

According to him, the “N65 per dollar rebate will be mostly ignore” while “non-oil exports’ contribution to forex revenue will be flat”.

He said the apex bank is faced with the tough choices of increasing forex supply to force price down significantly or increasing naira exchange price to its fair value, thus boosting forex supply. This will push the market towards equilibrium, bridging the unusual supply-demand gap that sustain high price differential.

He noted that while naira has depreciated by 259 per cent over the decade, other oil majors like Saudi and Kuwait have had stable, unchanged currency exchange rate during the period. He pointed out that the oil producers with stable currencies optimally, efficiently and prudently utilized their oil revenues.

The CBN had in early 2021 launched its “Naira-4-Dollar” Scheme with a promise to drive forex inflow and boost forex reserves. Under the scheme, the apex bank aimed at incentivizing Nigerians in the diaspora to remit their forex through designated agents, or International Money Transfer Organisations (IMTOs), rather than diversion to the parallel market.


According to the CBN’s circular dated March 5, 2021, all recipients of diaspora remittances through CBN- licensed IMTOs shall henceforth be paid N5 for every dollar received as remittance inflow.

The CBN shall, through commercial banks , pay to remittance recipients the incentive of N5 for every dollar remitted by sender and collected by designated beneficiary.

The incentive is to be paid to the recipients whether they choose to collect the dollar as cash across the counter in a bank, or transfer same into their domiciliary account.

Mr. Godwin Emefiele, Governor, Central Bank of Nigeria (CBN), had underlined the goals of the “Naira for dollar” policy top include “increase the transparency of remittance inflows and reduce rent-seeking activities,” assuring that “the new policy measure will encourage banks and financial institutions to develop products and investments’ vehicles geared towards attracting investments from Nigerians in the diaspora.”

Godwin Emefiele and Nigeria inflation

Godwin Emefiele, Governor of the Central Bank of Nigeria (Photo credit: PHILIP OJISUA/AFP/Getty Images)

He said the measure would help to make the process of sending remittance through formal bank channels cheaper and more convenient for Nigerians in the diaspora, pointing out that the use of reimbursements of remittance fees had been critical in supporting improved inflow of remittances to countries in South Asia and in improving their balance of payments position following the COVID-19 pandemic.

Emefiele said the policy was expected to enlarge the scope and scale of foreign exchange inflows into the country with a view to stabilizing the exchange rate and supporting accretion to external reserves.

The apex bank had in January 2016 suspended dollar sales to BDCs over similar allegation of racketeering.

This was followed by a similar directive to commercial banks to fully take up the responsibility of facilitating forex sales to Nigerians in need of forex for items not included in the list of 41 items banned by the CBN.

The apex bank also this year announced a new scheme to improve dollar supply in the economy. According to Emefiele,  the scheme “RT200 FX Programme” or “Race to $200 billion in FX Repatriation” aims to attain a goal of $200 billion in forex repatriation from non-oil exports over the next three to five years.

The new scheme is anchored on five pillars including non-oil commodities expansion facility, dedicated non-oil export terminal, non-oil forex rebate, value-adding exports facility, and biannual non-oil exports summit.



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