Central Bank of Nigeria sells dollars at N645 in fresh forex auction

The Central Bank of Nigeria (CBN) auctioned dollars at N645 apiece on Wednesday, a rate that was almost 30% weaker than on the tightly controlled official market. This came days after the CBN denied a report that it was planning to devalue the naira.

The naira sank to a record low of N467.04 per dollar on the Nigerian Exchange (NGX). This was the most significant decline in almost six months.

The CBN had auctioned dollars for N631 per dollar from N461.6 per dollar it sold at the Importers and Exporters (I&E) window days before the inauguration of President Bola Ahmed Tinubu.

Nigeria’s dollar earnings and reserves are dwindling and the government uses multiple exchange rates to manage supply and demand for foreign currency. Most residents who can’t get hold of the greenback on the main market or at auctions are forced to turn to black market trading where the naira is about 40% weaker.

President Tinubu had announced plans to adopt a uniform exchange rate during his inauguration on May 29 as part of measures to boost investment and grow the economy.

The CBN has been under pressure to devalue the naira in order to make it more competitive and attract foreign investment. However, the government has been reluctant to do so, fearing that it could lead to inflation and social unrest.

The decline in the naira has made it more difficult for businesses to import goods and services, which has led to higher prices for consumers. Also, CBN has been selling dollars in the forex market in an attempt to stabilize the naira, but it has been unable to prevent the currency from depreciating.

The adoption of a uniform exchange rate would likely lead to a further depreciation of the naira, but it could also help to improve transparency and reduce corruption in the foreign exchange market. It remains to be seen how the CBN will address the current situation. The government has a number of options, including devaluation, imposing capital controls, or printing more money. However, each of these options has its own risks and challenges.

“The president has said we don’t need all those windows, so it’s a question of time for the currency to find its real value at the official trade,” Adetilewa Adebajo, economist and chief executive with Lagos-based CFG Advisory told the US-based media network. CFG Advisory expects the currency to trade at about N650 a dollar following the devaluation.

Source

Dailytrust

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