The official exchange rate between the Nigerian naira and the US dollar witnessed a notable decline, falling by 2.04% to N1,615.94 per US dollar on Tuesday, February 27, 2024. This data, sourced from the FMDQ where forex is officially traded, reflects the ongoing challenges within Nigeria’s currency markets.
However, the turbulence escalated further as the dollar suffered a dramatic crash against the naira in the early hours of Wednesday, February 28, 2024, experiencing a staggering 13.4% drop. Despite efforts outlined by the Central Bank of Nigeria (CBN) Governor, Olayemi Cardoso, during a media briefing, wherein he detailed the apex bank’s initiatives to tackle the country’s forex crisis, the local currency continued to weaken.
Governor Cardoso revealed that the Monetary Policy Committee had opted to raise the monetary policy rate to 22.75% from 18.75%, a strategic move aimed at curbing the pace of inflation. Additionally, he elucidated on various policy measures implemented by the CBN to address the forex crisis, signaling a concerted effort to stabilize the economy.
Notably, the official exchange rate, as reported by the FMDQ, stood at a 19% discount compared to the rate reportedly sold to Bureau De Change (BDC) operators, which was pegged at N1,301/$1. In a bid to bridge this gap, the CBN took decisive action by allocating $20,000 to each eligible BDC operator at the lower band rate of N1,301/$1, derived from spot transactions at the Nigerian Autonomous Foreign Exchange Market (NAFEM). This strategic allocation is poised to infuse much-needed liquidity into the market and bolster the naira’s stability.
Moreover, specific guidelines were delineated for BDC operators, stipulating that they are permitted to sell foreign exchange to end-users at a margin not exceeding one percent above their purchase rate from the CBN, aimed at curbing excessive mark-ups and protecting consumers from exploitation.
Across forex markets, the naira experienced marginal declines, with daily turnover reaching $154.16 million. The parallel market, where exchanges occur unofficially, quoted the exchange rate at N1,630/$1, indicating a 1.23% gain from the previous day’s rate. Notably, the naira also made gains against the Euro and the Great British Pound, closing at N170/€1 and £1/N2,000, respectively.
In the realm of cryptocurrency exchanges, where forex is transacted on a peer-to-peer basis, the exchange rate exhibited volatility, oscillating between N1,606 and N1,415 to the dollar within 24 hours. Governor Cardoso, during the MPC meeting, underscored concerns regarding the activities of cryptocurrency traders, particularly highlighting Binance Nigeria’s involvement, where an estimated $26 billion had passed through over the past year, raising alarms over potential illicit flows and suspicious activities.
As Nigeria grapples with the complexities of its forex landscape, stakeholders remain vigilant, navigating through turbulent waters in pursuit of stability and resilience in the face of economic challenges.
Credit: Nairametrics (Texts excluding Headline)
