The Central Bank of Nigeria (CBN) is moving very fast to unify all the exchange rates in the country. The apex bank on Saturday adjusted the official exchange rate to N379 to dollar.
The official exchange rate had for nearly five months, remained at N361 to dollar. The move is expected to excite the International Monetary Fund (IMF) and World Bank that have concisely canvassed for unified exchange rate for the country.
The CBN recently pushed the official rate of the naira to N376 to dollar for International Money Transfer Operators rate to banks; N377 to dollar for banks’ dollar sale to CBN and pegged CBN’s dollar sales to banks at N378. In a statement announcing the new rates for the naira signed by CBN Director, Trade and Exchange Department, O.S Nnaji, the CBN directed the bureau de change operators to sell to end users at not more than N380 to dollar.
The current adjustment of the official exchange rate was in line with CBN’s earlier commitment to the IMF where the regulator promised to unify the exchange rate as part condition for accessing $3.4 billion IMF loan in May.
The loan, which came under the Rapid Financing Instrument (RFI) was meant to assist Nigeria’s fight against COVID-19 and resolve urgent balance of payment needs.
In a letter to the IMF, the Federal Government had assured that it would work towards “full exchange rate unification and greater exchange rate flexibility” to help preserve foreign exchange reserves and avoid economic dislocation. The new official exchange rate now displayed on the CBN website is closer to the N381/$ being traded on the secondary market intervention sales (SMIS) window. The SMIS is the market where importers bid for forex using letters of credit and Form M.
With subdued oil revenues, the adjustment would help boost funds available to the federation accounts allocation committee for disbursement to the three tiers of government.
However, the naira closed at N475 to dollar at the parallel market, where a large part of the demand for dollars have shifted to. Foreign investors, IMF and World Bank had long called for Nigeria to merge its multiple exchange rates, saying the absence of a single rate creates confusion and deters foreign investment.
The multilateral institutions insisted that with drop in foreign exchange reserves and decline in Nigeria’s dollar earnings over fall in crude oil prices, Nigeria had no option but to devalue its currency.
Analysts insist that with yesterday’s new official rate for the naira, the apex bank is finally bringing all the rates together. In an emailed note to foreign investors, Trading Desk Manager at AZA, global investment and research firm, Murega Mungai , said rising dollar demand is heaping pressure on the CBN for further devaluations to bolster exports.
