The exchange rate at the NAFEX window in Nigeria gained minimally on Monday, August 17, 2020, as it closed at N385.78. The rate dropped as low as 380 during intraday trading but also rose up to N386/$1 before its final closing rate of N385.78/$1.
Having closed at N386 on Friday, August 14 as reported, the opening indicative rate on Monday was N386.10/$1. This is a 10 kobo appreciation at the NAFEX window from the Friday closing exchange rate.
Naira at the unofficial trading space, the parallel market is stable in the meantime. For the six straight days, it has remained at N475/$1 and closed at the same rate Monday according to Abokifx.
Commentary
For the second time this year, the CBN appears to have devalued the official naira rates to N380/$1 in an attempt to unify the exchange rates. The multiple rates are already having tremendous effects as it appears to delay the $1.5 billion World Bank loan to Nigeria. More so, Nigeria continues to deal with dollar shortage and a looming recession.
Is CBN Unifying Exchange Rates Across Markets in Nigeria?
There have been some new changes in FMDQ data which reflect forex turnover for the last months. For forex August 14, to 17, 2020 there’s been at least $1 million decline from $21.09 million to $20.27 million.
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World Bank: Reform Holds Back $1.5 Billion Loan From Nigeria
As concerns for multiple exchange rate in Nigeria linger, the country is now less likely to get the proposed $1.5 billion loan from the World Bank in August Reuters Africa said.
The loan was supposed to be forwarded for approval to the World Bank board this August. However, it has been reported that Nigeria is failing to meet the negotiation terms.
Sources from the government who talked to Reuter said that “The World Bank is not convinced about the reforms,” citing the currency as the core issue.
Is CBN Unifying Exchange Rates Across Markets in Nigeria?
World Bank: Sub-Saharan Africa Facing a Recession Due to Coronavirus
Having said that Nigeria is headed for an economic disaster, the World Bank also loans money pegged to certain requirements. The CBN governor indulged the World Bank when it pledged to unify the exchange rates. This led to the devaluation of the naira twice this year.
That, however, isn’t enough to convince the World Bank according to Reuters who wants full reform of the naira policy. The sources also cite insufficient transparency in the elimination of fuel subsidies as one of the reasons the World Bank hasn’t approved the proposed $1.5 billion loan to Nigeria. Reuters said that a banking source mentioned that loan could wait until October.
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