Currency still costs more on the street two weeks after float

folarin okunola

July 4, 2016 12:29 PM

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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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.

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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.

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.

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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.

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.

folarin okunola