Business

Again, CBN devalues Naira, pegs new exchange rate

Published

11 months ago

June 1, 2023

Again, CBN devalues Naira, pegs new exchange rate

The Central Bank of Nigeria (CBN) has devalued the Naira to N631 to the dollar from N461.6 it sold at the Importers and Exporters (I&E) window the previous day.

The devaluation came 48 hours after President Bola Ahmed Tinubu announced the plans of the federal government to unify the country’s exchange rate to stimulate the economy.

In his inaugural speech, minutes after he was inaugurated as the 16th president of the country, Tinubu said, “Monetary policy needs a thorough house cleaning. The Central Bank must work towards a unified exchange rate. This will direct funds away from arbitrage into meaningful investment in the plant, equipment and jobs that power the real economy.”

There has been a wide margin between the I&E window and the parallel market, a situation that experts say encouraged round-tripping with Bureau de Change operators.

The situation has seen the CBN devise several measures to check the practice as well as completely stop the sale of forex to BDCs.

On Tuesday, President Tinubu met with the top echelon of strategic institutions including the CBN Governor, Godwin Emefiele, at the presidential villa.

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At the end of the meeting, neither the presidency nor Emefiele disclosed the outcome of the briefing. It was, however, gathered that the issue of the exchange rate was discussed at the meeting.

The President also met with the Group Chief Executive Officer of the Nigerian National Petroleum Company Limited, Mele Kyari. The removal of petrol subsidy was discussed, it was gathered.

However, findings revealed that at the resumption of the weekly bidding for foreign exchange, the apex bank sold the spot rate to banks on behalf of their customers at N631 to a dollar and most bidders got the full amount they requested.

One of the customers told this paper that they applied and that their request was fully granted at N631 as against N461.6.

The move has also seen prices at the parallel market trend downwards. Checks by this paper revealed that prices dropped from N750 to a dollar in the early hours of yesterday to N745 by evening in Abuja and Kano respectively.

The naira weakened in the parallel market to the lowest level in a year on expectations of a possible change in exchange rate management after Tinubu takes office on Monday.

The naira dropped to N762 a dollar on Friday from 775 the previous day in the unauthorized market in Lagos, said Umar Salisu, a BDC operator who tracks the data in the nation’s commercial capital.

The unit has weakened steadily in the parallel market since last week after stabilizing for most of this year.

The market arbitrage (difference between the official and parallel markets) has widened in the past three years from N100 per dollar or about 30 per cent in 2020 to over N400 per dollar (above 100 per cent) sometime last year when the black market rate spiked to N880/$.

Development institutions, including the International Monetary Fund (IMF), are wary of exchange rate differential in excess of five per cent and warn that such could trigger unhealthy manipulation that could negatively affect other efforts on market stabilisation.

From 2020 to 2022, the CBN spent about $42 billion intervening in the foreign exchange market to stabilise the naira. The amount was sold to the end-users, including students and tourists, at the official rates, which are way off the effective exchange rate of the naira.

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According to the Financial Stability Report, a publication of the CBN, the apex bank sold $9.2 billion in the market in the first half of last year.

The full data for the second half are not available, but the annualised value is assumed to have surpassed that, especially with the level of social and economic activities associated with the second half.

Whereas the black market rate averaged N730/$, the I&E window finished at suppressed N447/$ on average. That puts the arbitrage at N283/$, pushing the CBN’s FX subsidy in the year to about N3.65 trillion.

Realistic exchange rate regime to save N4tr – Ex-DG LCCI

In his analysis on the impact of FX subsidy, Dr Muda Yusuf, the Director of the Centre for Promotion of Private Enterprise (CPPE), said a realistic exchange rate regime would add N4 trillion to the federation account.

The former director general of the Lagos Chamber of Commerce and Industry (LCCI) said the exchange rate regime constitutes an enormous burden to the economy and public finance.

He said: “Nigeria is facing an all-time tight fiscal space. This year’s budget is stuffed with over 50 per cent deficit, even in the face of spurious revenue projections. The federal government is contemplating an additional loan of N8.8 trillion to support funding of the budget, which could raise its outstanding liabilities to nearly N80 trillion.

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However, he adds that there could be some benefits from the devaluation. “If it is perceived to be temporary, it may present attractive opportunities for foreign investors to invest in our domestic financial markets. It is not certain, but it is a possibility that FPI (foreign portfolio investments) inflow to Nigeria may temporarily increase.”

Again, CBN devalues Naira, pegs new exchange rate

Daily Trust

Aviation

Safety: NCAA to audit all domestic airlines, says Aviation minister

Published

20 hours ago

April 26, 2024

Trends Admin

Safety: NCAA to audit all domestic airlines, says Aviation minister

Minister of Aviation and Aerospace Development, Festus Keyamo, has said the Nigerian Civil Aviation Authority (NCAA) will carry out a comprehensive audit on all local airlines over safety concerns.

This is coming after a runway incursion incident in which Dana Air’s plane carrying 83 passengers with six crew members skidded the runway at the Lagos airport leading to diversion of flights

The operations of Dana Air were immediately suspended and NCAA directed to commence a comprehensive audit on the airline.

Keyamo spoke on the general audit of all domestic airlines on Thursday when he appeared on Channels TV Politics Today programme.
He said beyond the suspension of Dana Airlines and the ongoing audit of the airline, all other carriers in the country would be audited to guarantee the safety of passengers and the health of the civil aviation industry.

The directive to suspend the operations of the Dana Air was contained in a letter issued and endorsed by the NCAA Acting Director General, Chris Najomo, in Abuja.

It is the second time within two years that the NCAA would suspend the airline’s operational licence over safety violations.

It said the latest action was based on “elevated safety concerns” posed by the airline.

“As a precautionary step, and in accordance with Sec 31 (7) of the Civil Aviation Act 2022, the Authority has imposed a suspension on your Air Operator Certificate (AOC) with effect from 24″ April, 2024 at 23:59 to allow for a thorough safety and economic audit,” the letter partly read.

The NCAA also stated, “The safety audit will entail a re-inspection of your organisation, procedures, personnel, and aircraft as specified by Part 1.3.3.3 of the Nigeria Civil Aviation Regulations, while the economic audit will critically examine the financial health of your airline to guarantee its capability to sustain safe flight operations.”

Business

Anxiety as dollar exchanges for N1,420/$ on parallel market

Published

21 hours ago

April 26, 2024

Trends Admin

Anxiety as dollar exchanges for N1,420/$ on parallel market

There are fears prices of essential goods including food items in Nigeria may begin to rise again as naira witnessed a major slide against the United States dollar at the foreign exchange market on Thursday.

The naira fell to N1,309/$ on the official market and N1,420 on the parallel market, according to multiple sources.

This indicates a fall of N90 or 6.8 per cent from N1,330 recorded on Wednesday.

The latest downward trend in naira rate after recording appreciable gain for some weeks followed high demand for dollars.

A report by The Punch quoted currency traders at the popular Wuse Zone 4 market in Abuja as buying the greenback note at N1,340 and selling at N1,420, leaving a profit margin of N80.

In Lagos, a trader Ibrahim Garba told Newstrends that the naira-dollar rate changes almost hourly.

“It was selling at N1,380/$ at 11am today (on Thursday) and by 2pm, it had moved to N1,400/$,” he said.

The naira has this lost 26.2 per cent in two weeks when compared to N1,125/$ on April 12, 2023 on the parallel market.

The Central Bank of Nigeria on Monday approved the allocation of $15.83 million to 1,583 BDC operators.

This was aimed at enhancing liquidity in the unofficial market.

The CBN in a letter to BDCs announced the allocation of $10,000 to operators across the country.

The allocation came at N1,021)$, aimed at stabilsing the foreign exchange market and ensuring accessibility of foreign currency to eligible end users.

Last weekend, the CBN Governor, Yemi Cardoso, said the Naira was declared the best-performing currency globally as of April 2024.

The naira was about the worst currency in March when it fell to as low as N1,600/$1 on the official market and N1800/$1 on the parallel market

Business

BDCs blame peer-to-peer Binance, others for naira fall

Published

2 days ago

April 25, 2024

Trends Admin

BDCs blame peer-to-peer Binance, others for naira fall

The president of the Association of Bureau De Change Operators of Nigeria, BDCs, Aminu Gwadabe, says BDC operators are committed to preventing speculators from attacking the naira.

Mr. Gwadabe said this in an interview on Wednesday in Abuja.

The Association of Bureau De Change Operators of Nigeria, as a self-regulatory body, has platforms to check the excesses of BDC operators, he noted.

“We have inaugurated state chapters whereby we can have a database of participants in the forex market. This is for the Financial Action Task Force (FATF) to understand this market and to know the participants; give them a simple registration,” he said.

Mr. Gwadabe said that the foreign exchange market needed a kind of harmonisation, centralization, and KYC to identify all business participants.

“This will enable the CBN to track other players in the market other than the BDCs and their levels of involvement. The BDCs is collaborating with the regulatory authorities for physical verification of offices using technology.

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“We want to balance international obligations with our own objectives. International obligations are templates that have been built without our input. We are coming up with our own template to balance it. We have seen some illegal economic behaviour, and the CBN and the security agencies are aware, and I am sure they will nip it in the bud,’’ he added.

He said the recent wave of naira depreciation was of concern to the BDC operators.

Mr. Gwadabe explained, “I am happy that the authorities, and even the BDCs as operators, have identified the peer-to-peer (P2P) platform. P2P is a platform like Binance where speculators use the dollar to buy USDT, a stablecoin that is pegged at one to the dollar.

“As long as Binance and such other platforms continue to be profitable, the naira will continue to depreciate. There are many of them in the system. Binance has been nipped in the bud, but there are still many. They are online platforms with no registration or restrictions.”

Mr. Gwadabe said that the CBN and the security agencies were already aware of the antics of the platforms. According to him, they are more of an illegal form of economic behaviour, and the people behind them lack patriotism.

“People have turned the dollar into an asset—a commodity of trade—which is why those platforms continue to thrive. We have seen where people are buying dollars into their domiciliary accounts to finance these schemes. A lot of millions of dollars are going out of the system. It is one USD to one USDT. The market can be liquid.

“Binance alone has four billion dollars of liquidity and more than two million transactions. Most of them source money to finance their transactions on the open market, and that is one of the reasons why the naira is depreciating,’’ he said.