It is very painful: the Central Bank of Nigeria has failed the naira. This Bloomberg piece explains it all. Since 2017, the naira has been unlucky, not because of crude oil prices, but due to unhinged experimentations. You export something, CBN pays you N385 per dollar but when you want to import, you have to source it in the black market at N460. How can a business operate like that?
“How do you tell an exporter to export and you are giving him 386 per dollar? Is that fair to the exporter?” said Muda Yusuf, director general for Lagos chamber of Commerce and Industry.
So, when CBN put one of those thoughtless rules, everyone left the formal channel for exports and with that, pressure mounted on the Naira sending it close to N500 per dollar. I am happy they have backtracked.
Do we test these policies in economic models before pushing them out? A secondary school economics student would have picked holes in some of these policies.
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Nigeria’s central bank has backtracked on a rule that banned companies from sourcing imports from third parties other than manufacturers after the naira extended losses in the black market due to rising demand.
A circular by the regulator to banks this week explained that importers can open bills of collection in favor of agents and third parties to import goods, a softening of restrictions introduced in August.
The directive forced importers to redirect their dollar demand to the parallel market, resulting in a weakening of the local unit to a three-month low of 480 naira to the dollar on Friday. The naira traded at 385.50 to the greenback on the importer and exporter window as of 4:22 p.m. in Lagos, with the spot rate at 383.
Sliding Further
Insufficient dollar supply pressures the naira to weakest in three months
The widening gap in the official and parallel is rates is being fueled by individuals and companies diverting export proceeds and their remittances away from approved channels. The central bank has said banks should report any exporter caught in the act.
“How do you tell an exporter to export and you are giving him 386 per dollar? Is that fair to the exporter?” said Muda Yusuf, director general for Lagos chamber of Commerce and Industry.
There is a need to allow the foreign-exchange market to function properly to attract more inflows of foreign exchange to avoid transactions being driven underground, Yusuf said.
The previous central bank directive hurt businesses, Bala Idris, import manager for snacks and cereal-maker Nasco Group said. It led to his firm cutting production capacity and reducing working hours by 10% due to increase in the local prices of raw materials after it was unable to import.
The central bank has to allow for a more flexible and practical exchange rate to improve liquidity, Idris said. Authorities should allow the naira to change hands at 450 to 480 per dollar because “that will motivate exporters to bring all their inflow into the market for genuine importers.”
Source: Bloomberg
The Biggest Problem in Nigeria – The Gyration of Naira is Now A National Security Threat
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The people who need management are managing others, including the naira.
The CBN basically introduces new rules on the naira every month, with amalgam of policies and interventions; yet everything remains under water.
The folks at CBN have reached both their physical and intellectual limits, they have nothing more to contribute positively with respect to naira.
With all the run around, the naira continues on its freefall, yet they still believe they deserve their salaries.
We remain specialists when it comes to rewarding mediocres handsomely. Everyone seems to be a great performer here, because the benchmark for excellence is set below zero.
Emefiele is finished, between him and Buhari, I am struggling to know who will carry first from the other side.
Sad one indeed
Jos
Where mediocrity rules, people suffer!
Maybe its time importers and exporters turn to cryptocurrencies? We buy mainly from China and most sellers over there accept cryptocurrency. This will reduce the dependency for dollar in our foreign trades.
Sad one indeed, I weep for my country Nigeria
There are leakage in the furnace at different point, the cbn keeps patching,the furnace might explode sooner or later.
Obiadada
Naira needs special intervention to rescue its value otherwise before Christmas its value will depreciate to 800 per 1usd
The CBN should devalue the naira abeg.just as Zimbabwe did in the past.because it’s of no use again.
If you know Emefiele you would understand that he is an unrepentant experimentalist. He is so uncertain and thrives on trial by error… Find out from Zenith Bank and Xray his management style as DMD and MD. Is appalling he is doing same in CBN. Nigeria rewards mediocrity because the principal in Aso Rock is a super mediocre!
There is nothing God can not do
This article make absolute no sense…. What do Nigeria export other than oil… I agree that market demand need to determine the rate of the naira but to suggest that Nigeria export at #385 and import at #460 is a rubbish comparison because Nigeria doesn’t have anything to export whatsoever. We import everything because we do not have anything to export…. other than raw materials which exports needs to be discourage hence not a bad idea if CBN is not promoting such activities.
It’s a shame that the greed of the CBN Governor and that o his cohorts had led us this far. They are only milking the industrialists and making millions for themselves daily. Most of the policies introduced by the CBN are outright mediocrity. God dey Sha!