The Naira weakened significantly on the parallel market, dropping below 480 to the dollar levels at 485 most recently. The Central Bank of Nigeria introduced a ‘Naira 4 Dollar Scheme’ for remittances from the diaspora, in what is being seen by markets as effectively a further official devaluation. In a circular issued to all deposit banks and international money transfer operators (IMTOs), the CBN said that all recipients of diaspora remittances through approved IMTOs and commercial banks will receive an extra 5 Naira for every dollar received as a remittance inflow.
This means that a dollar fetching 412 at the official rate last week will instead now pay 417, said AZA, Africa’s largest non-bank currency broker by trading. Effective from March 8 to May 8, the scheme is designed to encourage the inflow of diaspora remittances and forms part of the central bank’s continued efforts to improve remittance inflows into the country through official sources. It is also intended to reduce rent-seeking activities and to provide Nigerians in the diaspora with a cheaper and more convenient way of sending remittances.
On the I&E Window (NAFEX), the Naira weakened to a low of 415 compared to the previous week’s close of 411.88, due to the latest perceived devaluation of the currency. In the coming week, we expect the Naira to slide further toward 500, as market rates react negatively to the Naira 4 Dollar Scheme. On the NAFEX front, the Naira could weaken towards 425 levels in a bid to converge towards the parallel market.
