Despite efforts by the CBN to defend the Naira, its value has decreased again

The Naira has further depreciated at the parallel market, losing N1.50 to the dollar. It traded at N225.5 to the dollar at the parallel market on Monday afternoon, while the official interbank rate also dropped by 0.05 to N196.95 to the dollar. This comes against the recorded N224 to a dollar on Friday. Traders have so far attributed this depreciation to the lack of sufficient dollar quantities at the market.

While the CBN Governor continues to work harder to save the Naira, nothing good seems to be coming from these efforts. Key players in the banking sector, comprising of some CEOs and certain committee members have expressed their discontent with the ways in which the currency is presently handled. Analysts have deliberated on the logical basis behind the current value of the Naira amidst the incessant fall in oil prices and the CBN’s currency controls. However while the general conclusion is that none of this is working, the CBN would beg to differ.

The CBN governor, Godwin Emefiele has continued to defend his currency controls as he remains resolute that the Naira is “appropriately priced”. He made this assertion at the  Financial Times Africa Summit that commenced on Monday. However in the same summit, the head of Ecobank pointed to the fact that only about 20 percent of the economy was supported by the fixed foreign exchange rate. This presents a reason the governor’s honorable intentions may come across as an attempt at shielding bigger problems.
While a decision by the Central Bank of Nigeria (CBN) to reject cash deposits in dollars resulted in the rise of Nigeria’s currency against the US dollar in the first week of August, this was rather short-lived. A forex trader, who chose to speak under the condition of anonymity confirmed that the Naira had indeed appreciated from 220 to 218. Also The Central Bank of Nigeria (CBN)  increased the list of restricted items excluded for funding from the official foreign exchange (forex) market. However despite banning 41 items from the official forex market, demand is still not being met.
There has been continuous pressure on the currency as the fall in oil prices and the imbalance between increasing demand for foreign currency and the foreign exchange available, continue to intensify. Over the past year the Naira lost about 15 % against the dollar with an official devaluation in November. It was devalued from N150-N160 to the U.S. dollar to N160-N176 as it battled to preserve macroeconomic stability, while raising serious concerns.
Segun Agbaje, Managing Director of GTB, a top tier Nigerian lender, said in August that the exchange rate is unsustainable, and will need to be devalued by 10 percent for the Naira to settle.

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