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  • Business - Economy
  • Updated: July 04, 2020

CBN Devalues Naira To N380 Three Months After First Devaluation

CBN Devalues Naira To N380 Three Months After First Devaluat

The Central Bank of Nigeria (CBN) has reportedly devalued the naira again, three months after the last devaluation took Naira from N307 to N360 a dollar. The CBN devalued the naira at one of its currency auctions for importers on Friday. The devaluation of naira occured weeks after the CBN announced it will end the era of multiple exchange rates in Nigeria.

According to a report by Bloomberg, the naira was devalued and traded at N380 to one dollar - rising from the previous amount of N360 a dollar. This is close to the N388 per dollar which the Investors & Exporters (I&E) window, also known as NAFEX, has been able to maintain since mid-May - after oil prices began to recover.

The plan to end multiple exchange rates in Nigeria has already brought calm in the forex market. The multiple exchange rate frequently causes confusion within the market, causing foreign investors to loss interest in investing into the Nigerian market. The unification of the exchange rates will merge the rates of the CBN and that of the NAFEX.

The multiple exchange rate regime is being used by the Central Bank of Nigeria (CBN) to manage pressure on the naira. The Minister of Finance, Zainab Ahmed, was the first to hint investors about the end of the multiple exchange rates in Nigeria. Ahmed stated that Nigeria will unify the multiple exchange rates in order to generate more local currency from its dollar inflows.

The new development comes at a period the country is having forex problems caused by the oil price crash and the economic fallout of the coronavirus pandemic in Nigeria. The CBN governor, Godwin Emefiele, said the unification will be in line with the NAFEX and not the black market. Nigeria has three exchange rates - CBN, NAFEX and the black market.

Emefiele said the discussion for unification can't include the black market because the parallel market aid illegal business. He said illegal businesses go there for dollars as their businesses are not recognised by the authorities. While buttressing his point of the illegality of the parallel market, Emefiele said COVID-19 lockdown measures has proved his point as businesses that needed forex have been on lockdown, yet the parallel market is still operational and receiving high demand for forex

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