The Central Bank of Nigeria on Thursday devalued the naira slightly as the year draws to a close.
The regulator sold dollars at the I&E window to banks at N410/$, as against the erstwhile prevailing rate of N395/$.
The I&E window is the foreign exchange market outlet through which investors and exporters access dollars.
The Nigerian currency has come under severe pressure this year following a dwindling inflow of foreign exchange earnings due to a fall in revenues from oil exports, the country’s main exporter commodity.
The naira faced pressure across the entire foreign exchange market. On the unofficial parallel market otherwise known as the black market, the currency fell as low as N500/$.
The naira got some relief after the central bank reviewed its regulations on Diaspora remittances, that permitted recipients to be paid locally in dollars.
Despite the temporary relief, analysts and economist have insisted that the naira exchange rate must be adjusted to reflect the current realities in Nigeria’s foreign exchange market.
The CBN has employed a piecemeal approach to the naira rate adjustment this year. On July 3, it lowed the naira value on the I&E window to N380/$ from N360$ and followed this up on July 7 by a further reduction of the naira value to N381/$.
Thursday’s slight devaluation is “interesting”, says one analyst. But he says of this approach that it is “unfortunate that they are using a razor blade to slaughter a ram. Why not take the bullet once and let the market have clarity and gain confidence over time, rather this approach that continues to reinforce the market expectation of further devaluation?
