Naira Devaluation: Latest CBN News Today 20th June 2023

Recent Developments in CBN: Understanding Naira Devaluation

On June 19, 2023, the Central Bank of Nigeria (CBN) made significant announcements that have sparked nationwide interest and concern. These developments include changes in CBN leadership, a scarcity of naira, and the devaluation of the currency. In this article, we aim to provide clarity on these issues and explore their potential impact on the Nigerian economy.

N800/$”: Black market sell dollar cheaper than banks as rates near convergence

Following the Central Bank of Nigeria’s decision to float the Naira, the Nigerian currency has continued its downward spiral against the US dollar. Recent data indicates that the various exchange rates for the Naira are approaching convergence, with the official market and black market rates now closely aligned, a situation not seen in years.

According to reports, the Naira closed at nearly the same rate across multiple exchange platforms, including the Investors and Exporters window, the Peer-to-Peer market, and the black market on June 19, 2023. In the official market, the Naira traded at N770.38/$1, representing a 16.2 percent loss in value compared to the previous closing rate of N663.04/$1 on June 16, 2023.

During trading on that day, the Naira even reached as high as N799/$1, indicating that it may soon surpass the N800/$1 threshold. This significant depreciation of the Naira is accompanied by a decline in forex turnover by 74.98 percent, falling from $233.80 million to $78.03 million compared to the preceding trading session.

The depreciation of the Naira is not limited to the official market but is also observed in other sectors. In the Peer-to-Peer window, the Naira closed at N772/$1, a decrease of N2 from the previous trading session’s rate of N770/$1. Similarly, in the black market, the Naira depreciated by N13, resulting in an exchange rate of N769/$1, compared to the previous rate of N756/$1. Notably, the black market rates appear lower compared to those offered by banks and other official forex dealers.

In another development, the Central Bank of Nigeria has lifted the dollar cash deposit restrictions on domiciliary accounts, a policy previously implemented under the leadership of Godwin Emefiele. This change allows Nigerians to have unrestricted access to funds in their accounts. It is anticipated that these policy adjustments will improve liquidity and stability in Nigeria’s foreign exchange market.

Change in Domiciliary Account Rules

The CBN has taken proactive measures to enhance clarity and liquidity in the foreign exchange (FX) market. One of these steps involves removing previous restrictions on domiciliary accounts, thereby allowing unrestricted access to funds and enabling daily withdrawals of up to $10,000.

Under the new policy, ordinary account holders can freely deposit and withdraw funds, provided that banks conduct necessary Know Your Customer (KYC) checks and comply with anti-money laundering and counter-terrorism financing laws.

This adjustment in rules follows a Bankers’ Committee meeting, which aimed to improve transparency, liquidity, and price discovery in the FX market. The goal is to discourage speculation and ensure the smooth processing of visible and invisible transactions.

Investigation into Former CBN Governor

In a surprising turn of events, the Department of State Services (DSS) conducted a search of the suspended CBN Governor, Godwin Emefiele’s Lagos residence, resulting in the retrieval of 18 bags of currency and documents. These items were subsequently confiscated.

Emefiele is presently in DSS custody, and investigations are underway to examine his activities during his tenure. Additionally, DSS officials are searching for Emefiele’s personal assistant, who is believed to possess crucial information about the former governor’s assets and wealth.

Naira Devaluation by CBN

The CBN has officially devalued the naira by adjusting the exchange rate on its website. This change, effective from June 14, 2023, reflects the bank’s response to economic realities and its efforts to align the value of the naira with the global currency market.

As part of this new measure, the previous exchange rate of N463 per dollar has been replaced with N632.77 per dollar for transactions through the Investors and Exporters (I&E) window.

The decision to devalue the naira aims to improve the efficiency of the foreign exchange market and stimulate foreign investments for Nigeria’s economic growth.

Accusations Against Godwin Emefiele

Fresh allegations have emerged against the suspended CBN Governor, Godwin Emefiele. Reports suggest that Emefiele and other high-ranking officials will face questioning on several fronts, including allegations of financing the Indigenous People of Biafra (IPOB), controversies surrounding the sale of Polaris Bank, misuse of loans under the Fadama Scheme, and reports of fraudulent activities in the forex market.

Security sources indicate that Emefiele is expected to face charges in court in the coming week.

Uncertainty in the Black Market

With the recent CBN directive allowing banks to engage in free trade of dollars, uncertainty looms over the unofficial naira black market. The exchange rate in the I&E window has surged to N610 per dollar, causing disruptions in the market.

The directive aims to increase the inflow of foreign exchange into the economy, potentially leading to a rise in the inflation rate. Although the CBN’s move is unlikely to eliminate the black market entirely, significant changes may occur.

Babajide Komolafe, Vanguard Economy Editor, suggests that this directive could enhance public confidence in banking transactions. However, he emphasizes that similar measures in the past have not completely eradicated the black market.

The repercussions of this policy change are still uncertain, leaving black market operators in a state of suspense.

As we continue to monitor these developments, it remains to be seen how they will shape the Nigerian economy. Stay tuned for further updates as the situation unfolds.