The exchange rate of the Nigerian currency versus the greenback recently plunged to an all-time low of NGN860:USD1. The naira’s depreciation has been attributed to shortages of foreign exchange on the official market and the rising demand for forex. The Central Bank of Nigeria (CBN) said it has revoked the licenses of nearly 2,700 bureaux de change (currency exchanges).
Widening Gap Between Official and Parallel Market Exchange Rates
On July 20, the Nigerian currency reportedly hit a new low of NGN860 per dollar on the parallel market. The currency’s fall widened the gap between the so-called import and export weighted average rate (NGN773:USD1) and the rate offered by black market dealers.
According to a Reuters report, the currency’s plunge followed the Central Bank of Nigeria (CBN)’s decision to float the naira, which was made shortly after Bola Ahmed Tinubu’s inauguration as the Nigerian president. The report added that the naira’s depreciation came a week before the CBN monetary policy committee’s next meeting.
Nearly 2,700 Currency Exchanges’ Licenses Revoked
As reported by Bitcoin.com News, the CBN initially devalued the naira by 30% before allowing the currency to gradually depreciate against the greenback and other major currencies. Some Nigerian economic experts suggested that the central bank’s ultimate goal is the unification of the parallel and official exchange rates.
However, the shortage of dollars in the formal market coupled with the rising demand for forex has increased pressure on the naira.
Meanwhile, in an attempt to halt the currency’s slide, the CBN reportedly announced on July 20 that it had revoked the licenses of 2,698 bureaux de change. According to a local report, the decision to withdraw the licenses is part of measures adopted by the central bank which seek to curtail or limit the currency exchanges’ influence on the naira-to-dollar exchange rate.
Register your email here to get a weekly update on African news sent to your inbox:
What are your thoughts on this story? Let us know what you think in the comments section below.