After much anticipation and speculation, the Central Bank of Nigeria (CBN) has come out with a directive that bureaux de change operators in the country should not sell dollars higher than N380 to end users.
This was contained in a memo signed by O.S. Nnaji, director of the apex bank’s trade and exchange department. The memo stated:
“Please be advised that the applicable exchange rate for the disbursements of proceeds of IMTOs for the period Monday, March 23 to Friday, March 27, 2020 is as follows:
- IMTSOs to banks: N376/$1
- Banks to CBN: N377/$1
- CBN to BDCs: N378/$1
- BDCs to end users: Not more than N380
- Volume of sale to each market is $20,000 per BDC.
Kindly note that the GBP rate should be derived from USD cross rate on the date of the sale.”
Before now, the Nigerian Naira has been trading officially at N360:$1 since 2016.
The Central Bank has hitherto mentioned that it would not devalue the nation’s currency unless the oil price goes below US$45 per barrel and the foreign reserves goes below drops to US$30 billion.
With the prevailing conditions, the CBN has been forced to “adjust” the exchange rate.
The ongoing oil war between Saudi Arabia and Russia has pushed the oil price below the Nigerian Government’s trigger point of $45 per barrel and is currently trading at $26 per barrel and there is no end in sight as both parties have not reached an agreement on the additional production cut.
Also the ongoing coronavirus (COVID-19) has thrown the financial markets into unknown territories with the markets recording all time lows and coming back home to Nigeria, the inflation numbers released for February 2020 shows that inflation accelerated to 12.20% y/y from 12.13% in January 2020.
So with the prevailing market conditions, there has been an aggressive demand for foreign exchange by Nigerians which forced the Central Bank of Nigeria to rethink its decision not to devalue the Naira.
There is still speculation that it may still further push it to N400 if the sustained pressures continue.
