Mr. Godwin Emefiele, Governor of CBN

CBN Governor confirms adjustment of Naira to N410/$1 official rate

*The Monetary Policy Committee of the Central Bank of Nigeria expresses concerns over the rising inflationary rate in the country

Isola Moses | ConsumerConnect

The Central Bank of Nigeria (CBN) has suggested that country’s currency has been devalued.

Mr. Godwin Emefiele, Governor of CBN, while addressing bankers at a summit on the economy Friday, February 26 said the official exchange rate now stands at N410 to the a US Dollar.

That’s 7.6 percent weaker than the rate of N379 published on the Central Bank’s Web site.

Emefiele stated: “In order to adjust for the decrease in supply of foreign exchange, the naira depreciated at the official window from N305/$ to N360/$ and now hovers around N410/$.”

It was learnt that a weaker official rate would boost government Naira revenue from crude, which is sold in dollars, but converted to naira at the official rate of N379 per Dollar.

Earnings from oil exports account for about half of revenue going into the national treasury and about 90 percent of foreign-exchange earnings in the West African nation. The West African nation’s currency has been devalued twice since March 2020, Bloomberg report stated.

Another adjustment of the exchange rate could pave the way for further discussions with the World Bank, which is withholding a $1.5 billion loan until the government implements currency reforms to attract investment.

It is noted that the banking sector regulator has adopted multiple exchange rates since last year in a bid to avoid an outright devaluation.

The official rate used as a basis for budget preparation and other official transactions differs from a closely controlled exchange rate for investors and exporters known as Nafex, where the naira has traded in a tight range between N400 to N410 in the last few weeks.

The Nafex rate is different from the parallel market, considered illegal by the central bank, where the Naira closed at N472 to the greenback Friday.

ConsumerConnect had reported that the International Monetary Fund (IMF) said it urged for the unification of the various exchange rates and gradual but clear multi-step exchange-rate reforms in a recent economic report on Africa’s largest economy.

The Nigerian Government, however, disagrees with the IMF recommendation on concerns that another depreciation would add to double-digit inflation, which hit a four-year high in January.

Analysts’ have projected the Naira to trade at 426.5 per Dollar by the end of 2021, according to a Bloomberg survey.

A rebound in oil prices and recent initiatives by the central bank to boost Dollar inflows could reduce pressure on the currency.

The CBN Governor also said one of the Bankers’ Bank measures is already yielding desired results, as Diaspora remittances through the banking system have risen to over $30 million a week from $5 million following an order compelling lenders to pay only dollars to beneficiaries.

Emefiele stated: “We believe this measure will help to significantly boost inflows of foreign exchange and create much more liquidity in that space.”

Meanwhile, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria has expressed concerns over the rising rate of inflation within the country.

The MPC report released Friday noted that the surge in inflation rate has continued since the government closed the land border, affecting movement of goods across neighbouring markets.

The Nigerian Bureau of Statistics (NBS) has reported that the inflation rate, as of December 2020 was 15.75 percent, increasing from 14.89 percent of November.

This has affected cost of living in the country, dragging more Nigerians below the poverty line.

It was gathered the border closure played a role in the inflation rate, as the MPC report during their first statutory meeting for 2021, between January 25 and 26, also blamed the increase in inflation rate on insecurity and electricity tariff hike.

MPC also attributed the development to deregulation of the downstream sector of the oil industry, which erased the intervention of government through subsidy to temper price at fuel stations.

The report said: “The Committee expressed concerns on the persisting uptick in inflationary pressure for the sixteenth consecutive month, with headline year-on-year inflation moving further to 15.75 per cent in December 2020 from 14.89 percent in November 2020.

“This uptick was attributed to the increase in both the food and core components of inflation, which rose to 19.56 and 11.37 percent in December 2020, respectively, from 18.30 and 11.01 per cent in November 2020.

The Committee further explained: “This continued upsurge in food inflation was attributed to the logistical bottlenecks, spurred by the increasing security challenges in many parts of the country, which disrupted food production and supply to the market.

“Other factors driving the core inflation, include the recent deregulation of the downstream sector of the oil industry, which led to hikes in the price of Premium Motor Spirit (PMS) and the upward adjustment in electricity tariffs.”

However, the MPC assured that stimulus packages from the CBN and the government will curb rising inflation

“The Committee, however, noted that as output rebounds, supported by the suites of stimulus packages by both the Federal Government and the Central Bank, inflationary pressure would likely begin to moderate in the near term,” stated the report.

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