Naira weakens to N484/$1 despite new dollar policy – The naira yesterday exchanged at N484/$1 at the parallel market.
The rate is N4 weaker than N480/$1 it exchanged before the Central Bank of Nigeria began the implementation of its new ‘Naira for Dollar Scheme” on Monday.
The naira has, however, remained stable at N379 to dollar on the Central Bank of Nigeria’s (CBN’s) official rate, a check at the apex bank’s website showed.
The CBN had promised that the new policy would provide Nigerians in the Diaspora with cheaper and more convenient ways of sending remittances to the country.
The policy, which give N5 rebate for every $1 sent by Nigerians in diaspora to the country will be paid directly to the account of the beneficiaries, following receipt of the remittance inflows.
Market dealers have attributed the naira depreciation at the parallel market to speculators causing artificial scarcity of the dollar within the market.
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Managing Director, Financial Derivatives Company Limited, Bismarck Rewane, attributed the naira’s continued decline to heightened forex supply shortage, demand pressure and rationing.
He said for the naira rates to converge would require adoption of a full floating exchange rate system determined by the forces of demand and supply.
On the state of the naira, the International Monetary Fund (IMF) said exchange rate rigidities have constrained the economy’s ability to absorb external shocks. It therefore called for unified exchange rate for the naira to promote growth and attractive foreign capital.
According to the IMF, foreign exchange backlog and shortages are intensifying Balance of Payment (BoP) pressures insisting that exchange rate unification was imperative to reduce BoP risks.
It said that fiscal deficit will stay elevated in the medium term, while additional domestic revenue mobilisation is required to reduce fiscal risks.
The Fund further stated that fiscal transparency measures to be introduced to facilitate tracking. It also advised that the dependence on Central Bank of Nigeria’s overdraft for fiscal funding should be annulled, adding that conflicting objectives have undermined monetary policy effectiveness. The Fund advised that policy strategy should be strengthened to establish price stability.
The IMF insisted that restrictions on access to foreign exchange for certain categories of goods, and multiple exchange rates create distortions in both private and public sectors decision making. They discourage long-term investment, encourage smuggling and provide avenues for corruption.
Moving forward, a removal of foreign exchange restrictions, and a full exchange rate unification, in line with the authorities’ Economic Recovery and Growth Plan (ERGP), will help keep the parallel market premium low in a more sustained manner. It will help Nigeria move towards a more diversified economy.
Defending the dollar policy, CBN Governor, Godwin Emefiele said the move was also to increase the transparency of remittance inflows and reducing rent-seeking activities. He expressed optimism that the new policy measure will encourage banks and financial institutions to develop products and investments vehicles, geared towards attracting investments from Nigerians in the diaspora.
Reiterating the provision a new circular on remittances, the Emefiele said the bank introduced the rebate of N5 for every $1 of fund remitted to Nigeria, through International Money Transfer Operators (IMTOs) licensed by the Central Bank in order to incentivize the process of remittance.
He emphasized that the new measure would help to make the process of sending remittance through formal bank channels cheaper and more convenient for Nigerians in the diaspora.