“The Nigerian Naira has experienced significant fluctuations against major international currencies, with the Central Bank of Nigeria (CBN) and other financial institutions closely monitoring the situation. As of May 2, 2024, the Naira’s value has shown both increases and decreases across different markets, sparking discussions among Nigerians about the impact of devaluation on the cost of living and the economy. The public has expressed concerns and frustrations about the devaluation, with some calling for government action to stabilize the Naira’s value. The CBN and other financial institutions are working to find a solution to alleviate these concerns” – Twitter
The biggest risk to Nigeria’s economy, from the Naira, is not the different rates between the black and official rates, but the instability of the rates. As I argued in June 2023, positing that pursuing rate unification, via floating of the currency, was creating a solution where there was not a big problem. Indeed, unifying the black and official rates, while helpful, is not catalytic. What is catalytic is making sure those rates are stable over months. In other words, having a stable FX state is supreme.
Yes, if the black market rate is N1,000/$ and that is constant over nine months, businesses can plan and model using the rate. But if you have Naira fluctuating within N800/$ and N990/$ monthly, you will be hurting the economy, even though the rate may be lower.
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For transactional players (peer to peer, FX traders, etc), they look at daily exchange rates. But for investors and businesses, they look at Naira stability over a period. Our government must focus on the stability of Naira as that is more important, over the current policy of pure rate reduction. Of course, both are entwined, but the irony is that you need stability before rates can come down in sustained ways!
The production sectors are particularly vulnerable to exchange rate instability because they often rely on imported raw materials, equipment, and machinery. Fluctuating exchange rates significantly impact their input costs and challenging to maintain consistent pricing margins.
— Suleiman Ibrahim Abubakar (@Suleimabaker) May 2, 2024
Thu 2 May, 2024 • 11:00 AM
? 1 USD ? ?1,350.804
? 1 GBP ? ?1,660.967
? 1 EUR ? ?1,445.001
? 1 CAD ? ?970.698
v1.2.1— ?aira Rates (@naira_rates) May 2, 2024
Thu. 02 May, 2024 • 09:00 AM
?? 1 USD ? ?1,235.00
?? 1 GBP ? ?1,545.99
?? 1 EUR ? ?1,321.90
?? 1 CAD ? ?900.36
?? 1 AUD ? ?807.55CBN Dollar to Naira Rates
?? 1 USD ? ?1,165.34— Dollar (@Dollar_Rates) May 2, 2024
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But we are largely transactional players in Nigeria, whether as politicians or businesspeople. Our banks are transactional, young people want to trade forex and crypto, the politicians trade virtually everything. If you look closely, the naira is mirroring Nigerians, it’s a country of contradictions.
How did we degenerate to the level of talking about exchange rates almost everyday? 15 years ago, how many Nigerians knew the exchange rate of naira to dollar? Nigerians became so bad that exchange rates become central to their daily lives, it’s an anomaly, no country advanced with this level of misplaced priority.
The government of the day has been talking about reforms, with supporters and acolytes telling us that the ‘bold’ steps are necessary and they are for benefit of Nigerians. Can any of the talking heads put a number and time-line? That is how you know folks that are very sure of what they are doing or talking about. Shouting $1 trillion dollar by 2030 is as meaningless as fighting to strengthen the naira without visible increases in productivity.
Sometime last year, March 2024 was put as when results from the ‘reforms’ would start showing, but we blazed past March, with no one showing results.
All talks, zero substance.
It looks CBN has been given daily target of generating revenue from selling fired. When they have sufficient fired in their possetiin they reduce the rates because by selling
the same amount of forex at a comparatively lower rate they can achieve the daily target. However, when there reserve is small, they increase forex rate exorbitantly so that by selling the small available forex they can achieve their daily target. The CBN looks dies not have any expert to design and maintain the fiscal policy.