Nigeria endures scarcity, widening gap in exchange rates and a recession
The gaps between the official and parallel market rates of the Nigerian Naira continues to widen induced by forex scarcity and the resulting unofficial foreign exchange movements.
A unification of naira exchange rates is queued as the current rate at the parallel market progresses to N480/$1, but the official CBN rate stable at N379/$1.
What the CBN is doing about foreign exchange crises
The Central Bank of Nigeria has sustained the market and helped reduce scarcity levels which were the cause of the unofficial flows.
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CBN Governor, Godwin Emefiele, is still on the path to realising exchange rate balance. Nigeria’s apex bank has released funds to the Bureaux De Change (BDCs) to guarantee the availability of foreign exchange. However, the forex market stills calls for unification.
Having intervened earlier, the CBN still has the strength it needs to stop speculators and to unify the exchange rates.
Forex Unification
CBN Management has policies to stabilise the exchange rate as part of its mandate.
Through a unification, the gap between official and parallel could further be reduced. This would also make room for transparency and openness as the International Monetary Fund and the World Bank demanded. More so, scrambling demand for the naira would reduce with a unification.
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The CBN issued the official foreign exchange rate of the naira at N379/$1 from N306 four months ago. While this appears to have had positive results on market demand, it also narrowed the gaps.
The CBN is capable of punishing forex offenders by strengthening regulatory measures, but compliance with the official BDC selling rates and how it affects the economy is a role that forex dealers have to understand more.
If traders continue to patronize the forex speculators, the naira could break.
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