There are indications that the government has heeded to the advice of financial experts and devalued the nation’s currency.
The Governor of Central Bank of Nigeria, Godwin Emefiele, while addressing bankers at a summit on the economy in Lagos on Friday, said the official exchange rate now stands at 410 to the dollar, Bloomberg reported.
This represents 7.6 per cent devaluation compared to N379/$ published on the central bank’s website.
“In order to adjust for the decrease in supply of foreign exchange, the naira depreciated at the official window from N305/$ to N360/$ and now hovers around N410/$,” Emefiele said in Nigeria’s commercial hub.
The central bank’s spokesman could not be reached when contacted to clarify the governor’s statement, Bloomberg stated.
A weaker official rate would boost government naira revenue from crude, which is sold in dollars but converted to naira at the official rate of 379 naira per dollar.
Earnings from oil exports account for about half of revenue going into the national treasury and about 90 per cent of foreign-exchange earnings in the West African nation.
Nigeria’s currency was devalued twice last year, in March when the price of crude oil plunged in the international market and in July in response to pressures from lenders and dollar shortage.
Another adjustment of the exchange rate could pave the way for further discussions with the World Bank, which is withholding a $1.5 billion loan until the government implements currency reforms to attract investment.
The regulator has adopted multiple exchange rates since last year in a bid to avoid an outright devaluation.
The official rate used as a basis for budget preparation and other official transactions differs from a closely controlled exchange rate for investors and exporters known as Nafex, where the naira has traded in between 400 naira to 410 naira in the last two weeks.
The Nafex rate is also different from the parallel or black market, considered illegal by the central bank, where the naira hovers between 478 to 482 to one dollar.
The International Monetary Fund has suggested that the Central Bank of Nigeria should establish a more transparent, gradual, multi-step and market-based exchange rate policy to boost confidence in the market.
The IMF advised Nigeria to devalue the currency, saying that it is currently overvalued by 18.5 per cent on the official market.
However, the Nigerian government argued that further devaluation would worsen the economic situation and increase inflation.
The government said that exchange rate stability had contributed significantly to price stability, a critical component and objective of macroeconomic policy.