CBN has devalued the Nigerian currency, changing from Naira to US dollar.
Nigeria online news reports that the Central Bank of Nigeria (CBN) led by Godwin Emefiele devalued the naira by N6 against the US dollar.
This online news outlet understands that the devaluation of the naira has brought the local currency closer to the apex bank’s exchange rate unification agenda as recommended by the International Monetary Fund (IMF) and the World Bank.
All authorized distributors, exchange office operators (BDC) and service providers were informed on a weekly exchange rate for the disbursement of the income of the international money transfer service operators (IMTO) by November 30 2020, to add N6 on all rates.
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The new CBN rates set IMTO dollar sales to banks at N388 per dollar, higher than the previous rate of N382 per dollar; banks sell dollar to CBN at N389 per dollar, compared to the previous rate of N383 per dollar.
Similarly, CBN’s sale of dollars to BDC was set at N390 per dollar, compared to the previous rate of N384 per dollar. CDBs are intended for sale to end users at a price of no more than N392 per dollar, compared to the previous rate of N386 per dollar.
However, the main bank maintained the policy that authorized each BDC to buy $ 10,000 per week.
In the circular signed by the Director of the CBN, Department of Commerce and Exchange, OS Nnaji, the main bank said: “Please note that the applicable exchange rate for the disbursement of the income of International Money Transfer Service Operators (IMTO) for the period from Monday, November 30 to Friday, December 4, 2020 is as follows ”.
The circular entitled: ‘Weekly exchange rate for the disbursement of the income of the operators of international money transfer services’ fixed the sale of dollars from IMTO to banks at N388 per dollar; sale of dollar banks to CBN at N389 per dollar and sale of dollar CBN to BDC at N390 per dollar. The BDCs are now expected to sell to end users for no more than N392 per dollar and each BDC is entitled to buy $ 10,000 per week. ”
The CBN circular also stated that the rate of the British pound (GBP) should be derived from the cross rate of the US dollar on the sale date.
The last adjustment to the naira exchange rate was on August 27, 2020. A quick check on the CBN website as of Friday, November 20 showed that the official exchange rate still held at N379 per dollar. The main bank had previously moved the official rate from N360 per dollar from N307 per dollar.
Speaking about the exchange rate review, Alhaji Aminu Gwadabe, president of the Association of Office Exchange Traders of Nigeria (ABCON), told The Nation that “the exchange rate adjustment was intended to address market imperfections and achieve a single exchange rate “.
Meanwhile, the current devaluation of the local currency came after more than three years of pressure from managers of financial markets, the World Bank, and the International Monetary Fund to devalue the local currency.
Managers of the financial markets, the World Bank and the International Monetary Fund insisted that with the fall of foreign exchange reserves and the fall of Nigerian dollar earnings on the drop in crude oil prices, Nigeria had no more option that devalue your currency.
The price of crude oil has fallen to $ 48.17 a barrel, one of the lowest prices in almost three years. Nigeria derives more than 95 percent of its foreign exchange earnings from crude oil sales.
Other analysts said that the CBN has effectively unified exchange rates in the market in accordance with the recommendations of the World Bank and the IMF.
Analysts said the CBN move will mitigate portfolio investor fears, reduce rent seeking in the forex market, serve as a deterrent to currency hoarding and mitigate the economy’s income deficits.
“I called it exchange rate unifications. And it will calm portfolio investors’ fears, reduce rent seeking in the forex market, serve to deter currency hoarding, and mitigate revenue shortfalls in the economy. “