CBN devalues naira by N6 in move to unify exchange rates

The Central Bank of Nigeria (CBN) on Friday devalued the naira by N6 to dollar. The naira devaluation has brought the local currency closer to the exchange rate unification agenda of the apex bank as recommended by the International Monetary Fund (IMF) and World Bank.

In a weekly exchange rate for disbursement of proceeds of International Money Transfer Service Operators (IMTOs) for November 30, 2020, all authorized dealers, Bureau De Change (BDC) Operators and Service Providers were advised to add N6 across all rates..

The new rates pegged IMTOs sale of dollar to banks at N388 to dollar, higher than previous rate of N382 to dollar; banks sale of dollar to CBN at N389 to dollar, as against previous rate of N383 to dollar.

Also, CBN sale of dollar to BDCs was pegged at N390 to dollar, as against previous rate of N384 to dollar. The BDCs are directed to sale to end-users at not more than N392 to dollar, as against previous rate of N386 to dollar.

The apex bank however retained policy authorizing each BDC to buy $10,000 weekly.

The circular signed by CBN Director, Trade & Exchange Department, O.S Nnaji, said: “Please be advised that the applicable exchange rate for the disbursement of proceeds of International Money Transfer Service Operators (IMTOs) for the period Monday November 30 to Friday December 4, 2020 is as follows”.

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The circular titled: ‘Weekly Exchange Rate For Disbursement of Proceeds of International Money Transfer Service Operators’ pegged IMTOs sale of dollar to banks at N388 to dollar; banks sale of dollar to CBN at N389 to dollar and CBN sale of dollar to BDCs at N390 to dollar. The BDCs are now expected to sale to end-users at not more than N392 to dollar and each BDC is entitled to buy $10,000 weekly”.

The CBN circular also directed that the Great Britain Pounds (GBP) rate should be derived from the US Dollar across rate on the date of sale.

The last adjustment of the naira exchange rate was on August 27, 2020. A quick check on the CBN website as at Friday, November 20, showed that the official exchange rate still remained at N379 to dollar. The apex bank had earlier moved the official rate to N360 to dollar from N307 to dollar.

Speaking on the currency exchange rate review, President, Association of Bureaux De Change Operators of Nigeria (ABCON), Alhaji Aminu Gwadabe, told The Nation that “The exchange rate adjustment was meant to address market imperfections and achieve single exchange rate”.

The current devaluation of the local currency came after over three years of push from financial market managers, the World Bank and International Monetary Fund for the local currency to be devalued.

They 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.

Crude oil price has dropped to $48.17 per barrel, one of the lowest prices in nearly three years. Nigeria gets over 95 per cent of its foreign exchange earnings from crude oil sales.

Other analysts said the CBN’s has effectively unified the foreign exchange rates in the market in line with the recommendations of the World Bank and IMF.

They said the move by the CBN will assuage the fears of portfolio investors, reduce rent-seeking in the foreign exchange market, serve as deterrent to currency hoarding and mitigate revenue shortfalls for the economy.

“I called it exchange rate unifications. And it is going to assuage the fears of portfolio investors, reduce rent-seeking in the foreign exchange market, serve ad deterrent to currency hoarding and mitigate revenue shortfalls for the economy.”

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