Nigerian Finance Minister Zainab Ahmed has denied widespread reports that the Central Bank of Nigeria (CBN) approved a devaluation of the local currency sometime in May 2021. Instead, she attributes Naira’s decline to “volatility in oil price”. Ahmed’s remarks come just weeks after the official naira exchange rate fell from $381 to the dollar at the current rate of 411:USD1.
depreciation vs depreciation
as before Reported By bitcoin.com news, CBN initially allowed the naira’s exchange rate to drop to 419.5 per US dollar. However, since May 14, 2021, the exchange rate of the naira against the dollar has remained at or below 411. It is this apparent adjustment of the exchange rate by the CBN (which meets the definition of Investopedia). devaluation) which prompted reports that Naira has been devalued.
However, in that Explanation, Finance Minister Zainab Ahmed still refuses to compare the manipulation of the CBN with the exchange rate with devaluation. He said:
Don’t let me use the word devaluation. (d) Naira is responding to the market forces of demand and supply. We have oil and gas which, unfortunately, is still the major source of foreign exchange.
According to one report, oil contributes less than 15% to Nigeria’s gross domestic product (GDP), yet it “brings at least 70–85 per cent of revenue and 80–90 per cent of foreign exchange to Africa’s largest oil producer”. is.” To address this, Ahmed says Nigeria is now focused on finding and developing alternative sources of foreign exchange.
Integrating Naira’s Multiple Exchange Rates
Meanwhile, as the CBN and the Nigerian government attempt to consolidate the Naira’s multiple exchange rates, the currency in the parallel market continues to weaken. For example, at the time of writing, the sales rate of Naira was wear out To 502 against the dollar, up from 493 reported at the end of May. Before the devaluation, the black market rate of naira had stabilized around 485.
However, following the exchange rate adjustment of the CBN, the gap between the official and parallel market exchange rates has widened. This increase, in turn, raises new doubts about the central bank’s ability to integrate Naira’s multiple exchange rates.
Do you think it is possible for CBN to integrate the official and parallel market exchange rates of Naira? Tell us what you think in the comment section below.
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