It’s no longer at ease with the naira as it shrinks at the black market Friday, May 20, 2022, selling at NGN610 against the United States Dollar.
The latest USD/NGN exchange rate isn’t surprising because of the political tension from the parties’ primaries building up ahead of the 2023 general elections as we pointed out in our May 19 exchange rate update.
Other major currencies that are popular for global trade also gained massively against the troubled Nigerian naira.
Yesterday, USD/NGN closed at NGN605 before sliding into NGN610 (sell) and NGN605 (buy) a few minutes ago
The Euro which closed at NGN625 yesterday is now trading at NGN626 against the naira at the time of this report (12:46).
Pound sterling against the naira remains temporarily stable at NGN754.45, anything can still happen before the close of trading as the most populous African country swing into the weekend, but that doesn’t stop forex trading at the parallel market.
Calls To Float naira
In 2021, Nigeria’s Vice President Prof. Yemi Osinbajo told the management of the Central Bank of Nigeria (CBN) to float the Nigerian currency as a way to allow the real market realities to reflect on the exchange rate of the naira against major currencies.
Osinbajo who heads the economic team of the APC-led government at the Mid-Term Ministerial Performance Review Retreat pointedly said:
“We can’t get new dollars into the system, where the exchange rate is artificially low. And everyone knows by how much our reserves can grow. I’m convinced that the demand management strategy currently being adopted by the CBN needs a rethink, and that is just my view.”
The same opinion had been reechoed severally by the International Monetary Fund (IMF) and the World Bank, but the governor of Nigeria’s apex bank Godwin Emefiele told them that the naira will not be floated.
Floating the naira isn’t the way – Emefiele
Speaking at IMF/World Bank Spring Meetings in Washington DC, the United States in April, the CBN governor gave reasons why CBN couldn’t float naira.
“Yes they want us to freely float the exchange rate and you do know that this will have some impact on the exchange rate itself in the sense that when you allow that to happen, you will have some uncontrollable spiral in the country’s exchange rate.”nairametrics.com quoted Delta-born banker as saying.
But recent political development in Nigeria in the ruling All Progressive Congress (APC) where the CBN governor had shown interest to succeed President Muhammadu Buhari sends a wrong signal to investors.
It also drives home some of the allegations against the CBN governor: that he’s manipulating the foreign exchange rate to favour some people.
With the current bad state of the naira, it may slide to NGN700 against the US dollar before the end of 2022, if nothing urgent is done to address the abysmal depreciation of the Nigerian currency.
Will the naira ever regain its lost exchange rate glory?
Only the managers of Nigeria’s economy can provide a convincing answer.