Business

Devaluation speculation mounts as naira weakens on I&E window

 

*CBN removes N379/$1 rate from its website

 

The Central Bank of Nigeria’s (CBN) removal of the exchange rate of N379/$1 from its website homepage on Friday, as well as the weakening of the naira to a record low on the Investors and Exporters’ (I&E) window on the same day, reignited speculation in financial circles, at the weekend, that another devaluation of the local currency could be imminent.

 

Although the apex bank’s website still showed the selling exchange rate  of naira to the dollar at N380 per dollar as at May 10, New Telegraph learnt that the regulator looks set to unify the country’s multiple exchange rates around the I&E window rate.

 

According to traders, the naira hit a record low of N419.75 against the dollar before it closed at N411.67 per dollar on the I&E window on Friday.

 

Reuters quoted a currency trader at a top tier Nigerian bank as saying that:  “What the central bank is saying is that the (OTC) spot rate will be the official rate because that’s where the largest volumes trade.”

 

CBN Governor,  Mr. Godwin Emefiele, had said last year that the apex bank will pursue  exchange rate unification around the I&E window rate.

 

The World Bank and the International Monetary Fund (IMF) have consistently said that Nigeria’s multiple currency regime frustrates businesses and that the rates should be unified in order to attract investment.

 

Indeed, the World Bank has linked approval of a $1.5 billion budget support loan for Nigeria to currency reforms.

 

A sharp drop in the price of oil (the commodity that accounts for 90 per cent of Nigeria’s export earnings), coupled with a COVID-19-induced exit of foreign portfolio investors, has negatively impacted the country’s external reserves, thus making it difficult for the CBN to meet rising dollar demands.

 

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