After hitting a fresh all-time low of N710 against the dollar in late July, a new report says the Nigerian currency has rebounded by as much as 10%. After initially blaming speculators, the Central Bank of Nigeria said importers who failed to remit foreign currency earnings could cause the naira to depreciate.
Devaluation of the Naira
Less than two weeks after falling to an all-time low, the Nigerian currency rallied in parallel markets against the U.S. dollar and closed at 640 naira per dollar on Aug. 3. The rally represents a move above N710 per dollar from the currency’s late July lows.
According to the Business Daily, an increase in the supply of U.S. dollars and cooling demand for the greenback contributed to the Naira’s rebound. However, the rapid devaluation of the naira has prompted the country’s lawmakers to seek answers from the Governor of the Central Bank of Nigeria (CBN), Godwin Emefair, ahead of the currency’s recovery.
Emefiele, who had previously blamed speculators for the currency’s slide, reportedly claimed in court to lawmakers that the Nigerian National Petroleum Corporation’s (NNPC) failure to funnel money into foreign reserves also contributed to the naira’s plunge. However, some local reports, citing NNPC officials, rejected the CBN governor’s claims.
Meanwhile, CBN Deputy Director of Banking Services Egboagwu Ezulu, cited in a separate report, accused importers of dumping foreign exchange earnings overseas. He says:
We are accepting foreign exchange [forex] Leave the country and dump overseas; when we’re told to bring them back. If Nigerians brought back foreign exchange, we would not be talking about the challenges of foreign exchange. Both individuals and businesses are challenged to do the right thing.
Ezulu also argued that the CBN introduced an incentive called RT200 to encourage the repatriation of foreign exchange earnings to Nigeria. However, the CBN deputy director claimed that the central bank is seeing billions of dollars being exported abroad. According to Ezulu, this inevitably leads to increased pressure on the naira when billions of dollars are flowing out of the economy.
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