Nigerian Central Bank Governor Suggests Naira Has Been Devalued

Emefiele says exchange rate at 410/$; website shows 379/$ Weaker rate would boost government revenue from oil exports

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Nigeria’s central bank governor suggested the nation’s currency has been devalued. Addressing bankers at a summit on the economy in Lagos on Friday, Governor Godwin Emefiele said the official exchange rate now stands at 410 to the dollar. That’s 7.6% weaker than the rate of 379 published on the central bank’s website.

“In order to adjust for the decrease in supply of foreign exchange, the naira depreciated at the official window from N305/$ to N360/$ and now hovers around N410/$,” Emefiele said in Nigeria’s commercial hub.

The central bank’s spokesman could not be reached when contacted to clarify the governor’s statement.

A weaker official rate would boost government naira revenue from crude, which is sold in dollars but converted to naira at the official rate of 379 naira per dollar. Earnings from oil exports account for about half of revenue going into the national treasury and about 90% of foreign-exchange earnings in the West African nation.

The West African nation’s currency has been devalued twice since March last year. Another adjustment of the exchange rate could pave the way for further discussions with the World Bank, which is withholding a $1.5 billion loan until the government implements currency reforms to attract investment.

Another Depreciation

The regulator has adopted multiple exchange rates since last year in a bid to avoid an outright devaluation. The official rate used as a basis for budget preparation and other official transactions differs from a closely controlled exchange rate for investors and exporters known as Nafex, where the naira has traded in a tight range between 400 naira to 410 naira in the last few weeks. The Nafex rate is different from the parallel market, considered illegal by the central bank, where the naira closed at 472 to the greenback on Friday.

The International Monetary Fund has urged for the unification of the various exchange rates and gradual but clear multi-step exchange-rate reforms in a recent economic report on Africa’s largest economy. The Nigerian government disagrees with the Fund’s position on concerns that another depreciation would add to double-digit inflation, which hit a four-year high in January.

Analysts’ project the naira to trade at 426.5 per dollar by the end of 2021, according to a Bloomberg survey. A rebound in oil prices and recent initiatives by the central bank to boost dollar inflows could reduce pressure on the currency.

One of the central bank measures is already yielding desired results as diaspora remittances through the banking system have risen to over $30 million a week from $5 million following an order compelling lenders to pay only dollars to beneficiaries, Emefiele said.

“We believe this measure will help to significantly boost inflows of foreign exchange and create much more liquidity in that space,” he said.

– Bloomberg

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