Naira Exchange Rate Currency still costs more on the street two weeks after float

The decision of the Central Bank of Nigeria (CBN) float the Naira received mixed reactions and the Naira lost about 67% in value on the now official interbank market following the policy change.

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FX futures will improve market liquidity, Expert says play

FX futures will improve market liquidity, Expert says

(Herald)
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The Naira has been the subject of discussion amongst financial circles for the past few months. Should it be devalued? Does the government have a plan in place? Will the policies being pushed forward solve the problem?

These questions, and many more, have shaped the narrative of what is now a Nigerian economy clutching tightly to the threads of survival. As it stands, everything is wrong with Nigeria, and it's currency is a major crumbling pillar.

A trader changes dollars for naira at a currency exchange store in Lagos, Nigeria, February 12, 2015. REUTERS/Joe Penney/File Photo play A trader changes dollars for naira at a currency exchange store in Lagos, Nigeria, February 12, 2015. REUTERS/Joe Penney/File Photo

 

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The decision of the Central Bank of Nigeria (CBN) float the Naira received mixed reactions and the Naira lost about 67% in value on the now official interbank market following the policy change.

Central Bank Governor Godwin Emefiele speaks during the monthly Monetary Policy Committee meeting in Abuja play Central Bank Governor Godwin Emefiele speaks during the monthly Monetary Policy Committee meeting in Abuja, Nigeria January 26, 2016. (REUTERS/Afolabi Sotunde)

Since then, the Naira, previously pegged at N197-199/Dollar by the apex bank, has traded between N280-282/Dollar on the official market. This new rate was made possible by the strategic intervention of the CBN along with market forces of supply and demand, something the apex bank hopes will strengthen the Naira in the long run.
 

On the parallel market, the floating of the Naira has not had much effect on the value of the Naira hitting a positive stride. This morning, Monday, June 4, 2016, $1 will get you N351 on the parallel market which is around the same number the currency was trading even before the policy change. This means that, despite the efforts of the CBN, the Naira still costs more on the street than on the official market.

Naira closing gap with black market rate play

Naira closing gap with black market rate

(bloomberg/abokifx)

 

ALSO READ: FX futures will improve market liquidity

After the Brexit vote, the Naira gained massively against the Pounds Sterling but has since lost much of the gain to trade at N467/Pound on the parallel market. The Euro also gained against the Naira, coming in at N385/Euro.

CBN FX policy infographic play

CBN FX policy infographic

(Pulse/Orodata)

 

Economists and other stakeholders in the industry think it's too soon to make a definite call on whether the decision to float the Naira was the right one or not. However, despite making over $700 billion in 17 years of oil sale, Nigeria still has a 19.3 million housing gap, a 40,000MW power gap, a $75 billion infrastructural deficit and many more. We will have to wait and see if the Naira float will have any impact on these or if, like many before it in the past, this is just another misguided policy from the CBN.

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