The Central Bank of Nigeria (CBN) has reaffirmed its commitment to resolving the Foreign exchange crises currently seen in Nigeria.
The Central Bank of Nigeria disclosed this in response to lawmaker’s summons about the falling Naira.
At the start of July 2022 the exchange at the parallel market was trading at N605/$. Compared to the current value of N720/$, the Naira has decline by a whooping 19% in on month.
What the CBN is saying
In response to the Lawmakers summon of Central Bank of Nigeria (CBN) Governor Godwin Emefiele over the “free fall of the naira”.
The Bank said, “The CBN remained committed to resolving the foreign exchange issues confronting the nation and as such has been working to manage both the demand and supply side challenges.”
The bank said demand pressure was huge from manufacturers and individuals paying school and hospital fees abroad and that it was looking at ways to earn forex in the wake of dwindling oil proceeds.
Nigeria relies on imports for most of what it consumes. The central bank said the country needs to look inwards and adjust its consumption patterns, as one solution to the current challenge.
Emefiele has since introduced controls to restrict access to U.S. dollars for certain imports to boost local production.
What you should know
The Nigerian foreign exchange crisis was exacerbated after foreign investors fled as crude oil prices plummeted during the COVID-19 pandemic and Nigeria’s demand for funds increased. Crude oil prices have since recovered, but investors have not yet returned.
Since the central bank stopped selling FX to Bureau De Change operators in July 2021, the dollar shortage has caused Naira to record a record low in the parallel market in a row. This move heightened demand of dollars in Black markets where currencies determined demand and supply forces.
Bureau De Change operators cited a lack of FX and a surge in demand for the recent uncontrolled uptrend recorded in the market. Meanwhile, some bank users have complained that they have not been able to access their funds in their domiciliary accounts due to lack of liquidity.
Furthermore, can be linked to CBN’s money supply expansion which has aggravated inflation. This is because the inflation rate of an economy is one of the quantitative factors that affect currency exchange rates.