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Nigerian Currency Recovers Versus US Dollar — Central Bank Says Importers Must Repatriate Forex Earnings

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Nigerian Currency Recovers Versus US Dollar — Central Bank Says Importers Must Repatriate Forex Earnings

After touching a new all-time low of N710 per dollar in late July, a new report says the Nigerian currency has rebounded by as much as 10%. After initially blaming speculators, the Central Bank of Nigeria has said importers who fail to remit forex earnings may be contributing to the naira’s depreciation.

Naira Depreciation

Less than two weeks after it tumbled to a new all-time low, the Nigerian currency recovered against the U.S. dollar on the parallel market and went to close trading at N640 per dollar on August 3. This rebound represents a recovery of approximately 10% from the currency’s late July low of over N710 for every dollar.

According to a Businessday report, the increased supply of dollars, as well as the cooling demand for the greenback, had contributed to the naira’s rebound. However, before the currency’s recovery, the naira’s rapid depreciation had prompted the country’s lawmakers to seek answers from Central Bank of Nigeria (CBN) governor Godwin Emefiele.

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During his appearance before the lawmakers, Emefiele, who had previously blamed speculators for causing the currency’s slide, reportedly claimed that the Nigerian National Petroleum Company (NNPC)’s failure to remit funds into the foreign reserve had also contributed to the naira’s plunge. However, some local reports have quoted officials from the NNPC rejecting the claims made by the CBN governor.

Meanwhile, Egboagwu Ezulu, the CBN deputy director for banking services, is quoted in another report attacking importers whom he accuses of dumping foreign exchange revenues offshore. He said:

We are taking FX [forex] out of this country and dumping offshore; when we were told to bring them back. If Nigerians are bringing back FX, we would not be talking about the challenges of FX. There is a challenge for individuals and businesses to do the right thing.

Ezulu also argued that the CBN had introduced an incentive known as RT200 as a way to encourage the repatriation of foreign currency earnings back to Nigeria. However, the CBN deputy director claimed the central bank is seeing billions of dollars being exported out of the country. According to Ezulu, when billions of dollars are spirited out of the economy, this inevitably leads to increased pressure on the naira.

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Terence Zimwara

Terence Zimwara is a Zimbabwe award-winning journalist, author and writer. He has written extensively about the economic troubles of some African countries as well as how digital currencies can provide Africans with an escape route.

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Image Credits: Shutterstock, Pixabay, Wiki Commons

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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Alhaji Aminu Gwadabe

Nigerian Central Bank Told To Consider Floating The Naira, Recent Interest Rate Hike Slammed

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Nigerian Central Bank Told To Consider Floating The Naira, Recent Interest Rate Hike Slammed

The Central Bank of Nigeria should be discontinuing the fixed exchange rate system and let the naira freely float against the major currencies, Alhaji Aminu Gwadabe, the leader of a Nigerian association of bureau de change operators has said. The leader also slammed the recent adjustment of the central bank’s interest rate to 13%, which he said could have a negative impact on Nigeria’s underperforming economy.

Central Bank Told to Intervene to Save the Naira

The leader of a Nigerian association of bureau de change operators, Alhaji Aminu Gwadabe, has urged the country’s monetary authorities to consider allowing the local currency to freely float against the U.S. dollar. According to Gwadabe, doing this will help to prevent further depreciation of the naira.

In an interview with the News Agency of Nigeria, Gwadabe is also quoted advising the Central Bank of Nigeria (CBN) to consider intervening in foreign exchange markets. He reportedly said:

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CBN should contemporaneously undertake a large-scale dollar intervention in the open market that can inspire confidence in the Naira and checkmate the current tailspin. Once there is a significant positive movement, the market will react and, in all probability, spur an avalanche of panic selling and further buoy the Naira.

Gwadabe also reportedly said the CBN could still make a profit through a buyback of the dollars on the open market.

The comments by Gwadabe, whose organization’s members were previously accused of fueling the naira’s freefall on parallel forex markets, followed recent reports of the naira’s plunge and the CBN’s subsequent call on Nigerians to stop using the greenback for speculative purposes. With the latest plunge, the naira’s parallel market exchange rate of slightly over N700 for every dollar versus the official exchange rate of N424 implies the currency may be overvalued by nearly 70%.

Cashing Out Remittances in Dollars Exerts Pressure on Naira

Meanwhile, the News Agency of Nigeria report also quotes Gwadabe questioning the CBN’s decision to adjust the monetary policy rate (MPR) to 13% per annum. According to Gwadabe, the adjustment is likely to have a negative impact on Nigeria’s underperforming economy.

“Increasing the MPR contracts the supply side, it is the wrong prescription. Let’s not copy the Americans who target inflation with FED rates to curb money supply; their factors of production have been fully mobilized, ours is at less than 20 per cent and requires stimulation of the supply side,” Gwadabe is quoted explaining.

Instead of hiking the rate, Gwadabe recommended cutting the rate to 5% which he said “looks more appropriate.”

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Concerning the CBN’s decision to allow recipients of remittances to cash out in dollars, Gwadabe claimed this “fuels currency substitution.” Besides exerting more pressure on the exchange rate and inflation, this central bank policy “does not have a statutory backing unlike domiciliary accounts, therefore, it is illegal.”

Gwadabe also claimed that the solution to Nigeria’s currency woes “has to be psychological too” because the current “panic buying is driven more by psychology and less by economic fundamentals.”

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What are your thoughts on this story? Let us know what you think in the comments section below.

Terence Zimwara

Terence Zimwara is a Zimbabwe award-winning journalist, author and writer. He has written extensively about the economic troubles of some African countries as well as how digital currencies can provide Africans with an escape route.

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Image Credits: Shutterstock, Pixabay, Wiki Commons

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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Bureau De Change

Nigerian Currency Plunges To New All Time Low — Central Bank Blames Speculators

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Nigerian Currency Plunges To New All Time Low — Central Bank Blames Speculators

The Nigerian central bank has accused currency speculators of being behind the local currency’s recent plunge to a new all-time low of N710 against the greenback. The leader of a Nigerian association of bureau de change operators insisted crypto trading may be to blame for the naira’s recent plunge in value.

Nigerians Converting to USD

According to local reports, the parallel market exchange rate of the Nigerian currency against the greenback recently plunged to a new low of N710 per dollar. The currency’s rapid depreciation is reportedly being fueled by Nigerians who are converting their savings from naira to the greenback.

Yet, despite the currency continuing depreciation on the parallel market, the Central Bank of Nigeria (CBN) insists the naira’s official exchange rate against the dollar remains at approximately N424 for $1.

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In a statement following the naira’s latest fall, Osita Nwanisobi, the CBN’s director of corporate communications, blamed speculators for causing the currency’s recent fall. Nwanisobi nonetheless claimed that the central bank’s interventions such as the Naira for Dollar incentive scheme and the RT200 FX Programme are already helping Nigeria address its longstanding problem of foreign exchange shortages.

Resolving the country’s foreign exchanges helps to stabilize the naira’s exchange rate. Yet as a recent report by Bitcoin.com News suggested, the CBN’s Naira for Dollar remittances incentive scheme — launched in March 2021 — has failed to help halt the naira depreciation. The report pointed to the naira’s plunge against the dollar which was more than 25% at the time.

Crypto Trading Fueling Naira Depreciation

In addition to his claims the central bank’s interventions were working, Nwanisobi said Nigerians must also help “shore up the value of the naira.”

Meanwhile, Aminu Gwadabe, president of the Association of Bureau de Change Operators of Nigeria, is quoted in a Bloomberg report suggesting that crypto trading may be fueling the naira’s depreciation.

“The USD rate on the crypto floor is used in determining the value of the local currency,” Gwadabe is quoted explaining. On why Nigerians are buying the U.S. dollar, Gwadabe said they were doing this because they have lost confidence in the naira.

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Register your email here to get a weekly update on African news sent to your inbox:

What are your thoughts on this story? Let us know what you think in the comments section below.

Terence Zimwara

Terence Zimwara is a Zimbabwe award-winning journalist, author and writer. He has written extensively about the economic troubles of some African countries as well as how digital currencies can provide Africans with an escape route.

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Image Credits: Shutterstock, Pixabay, Wiki Commons

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Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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Blockchain

CBDC Ensures Nigeria Remains Competitive In Increasingly Digital World — Central Bank Governor

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CBDC Ensures Nigeria Remains Competitive In Increasingly Digital World — Central Bank Governor

The governor of the Central Bank of Nigeria (CBN) has insisted the recently introduced e-naira digital currency can potentially boost trade and investment activities in the country. He added the digital currency “would be necessary in the future to ensure Nigeria is competitive as the world becomes increasingly digital.”

CBDC Gateway to Digital Economy

The Nigerian central bank governor, Godwin Emefiele, has said the recently introduced digital currency, the e-naira, ensures Nigeria will remain competitive in a world that has gone digital. Specifically, the introduction of the central bank digital currency (CBDC) to the Nigerian payment space is expected to bolster trade and investment activities, a report quoting Emefiele has said.

Remarks by Emefiele are the latest by either a government or CBN official aimed at reassuring skeptical Nigerians. At the launch of the CBDC in October 2021, the country’s president, Muhammadu Buhari, similarly touted the introduction of the e-naira as something that would result in Nigeria’s GDP growing by $29 billion in 10 years.

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Besides reassuring statements, the CBN has used various events it has hosted as platforms for promoting the use of the CBDC. The latest of such events is the “eNaira – Africa’s Gateway to a Digital Economy” hackathon, which is set to commence on June 27 and is expected to run until July 21.

Identifying and Eliminating Glitches

According to a report in The Eagle Online, the CBN, which has encouraged Nigerians to register for the e-naira hackathon, believes the event might be useful in helping innovators think of innovative solutions for the CBDC. Emefiele also added:

We cannot deny the fact that the newly introduced CBDC (eNaira) would be necessary in the future to ensure Nigeria is competitive as the world becomes increasingly digital. We have seen in the past few years how digital currencies have opened international economies to individuals who wield them and how seamless they have made trading, buying, investing and other economic activities.

Meanwhile, a statement reportedly issued by both organizers and the CBN said innovators attending the event will look at ways of eliminating glitches that may hamper e-naira transactions. They will also be asked to come up with an e-naira design that addresses blockchain and cross-border remittances, the report said.

What are your thoughts on this story? Let us know what you think in the comments section below.

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Terence Zimwara

Terence Zimwara is a Zimbabwe award-winning journalist, author and writer. He has written extensively about the economic troubles of some African countries as well as how digital currencies can provide Africans with an escape route.

Advertisement

Image Credits: Shutterstock, Pixabay, Wiki Commons, mundissima / Shutterstock.com

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Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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