Over the last nine months, the naira has lost value against most traded currencies at a worrisome rate.
Ordinarily, the decision by the policy committee of the Central Bank of Nigeria (CBN), at its September meeting, to clamp down on www.abokifx.com, a web portal that aggregates the naira’s exchange rate at the parallel market would have been welcome. Coming on the heels of the apex bank’s decision to excise Bureaux de Change (BDCs) from the domestic foreign exchange supply chain, this looked like a further signal of the CBN’s new resolve to clean up the nation’s foreign exchange market.
And not too soon. Over the last nine months, the naira has lost value against most traded currencies at a worrisome rate. In part, the economy’s struggle to put behind it the debilitating effects of the coronavirus pandemic explains this sorry state. Worse, in an attempt to support oil prices, the Organisation of the Petroleum Exporting Countries (OPEC) imposed on its member states swingeing cuts to their crude oil production. This latter condition has meant that Nigeria has not been able to produce enough of its main crude oil earner to take advantage of the relatively high rates at which crude oil currently sells for at the international markets.
Not surprisingly, therefore, we have seen the balance on the country’s gross external reserves wobble. With the CBN having reversed policies which previously saw foreign portfolio investors throng the nation’s money market in search of the high returns promised them, the apex bank has long since become the sole supplier of foreign exchange to all the windows in that market. And at its current low level, our gross external reserves are not healthy enough to meet trend demand.