CBN’s Bold Moves Result in Marked Improvement for Naira Against Dollar

The Nigerian currency, the naira, has been on an upward trajectory against the dollar, evidenced by the fifth reduction in the exchange rate for customs import duties and cargo clearance in less than a fortnight. The rate plummeted from N1,612 per dollar as of March 15th to a current rate of N1,405.46 per dollar.

This adjustment follows the Nigerian Customs Service’s announcement that the Central Bank of Nigeria (CBN) would set the exchange rate for duty collection and cargo clearance based on the official market rate. The decrease has been consistent, showcasing a marked appreciation of the naira in both parallel and official foreign exchange markets. Remarkably, the naira’s value improved from N1,615 per dollar on March 13th to N1,382 per dollar by March 26th.

The strengthening of the naira can be attributed to a series of strategic reforms and measures implemented by the central bank. These efforts are aimed at curbing inflation and ensuring stability within the foreign exchange market. Notably, last week, the CBN announced it had successfully cleared an over $4 billion backlog in foreign exchange forwards, a move that has significantly benefited both local and international businesses.

Moreover, the CBN has introduced a new regulation for International Oil Companies (IOCs), limiting them to transfer only half of their forex earnings immediately and delaying the other half for 90 days. Additionally, commercial banks have been restricted from using profits from foreign exchange sales for operational expenses and dividend disbursements. The central bank has also started selling dollars to Bureau de Change operators at N1,251 per dollar.

During its latest Monetary Policy Committee meeting, the CBN announced an increase in the interest rate from 22.75% to 24.75%, a significant 200-basis point hike. Mr. Yemi Cardoso, the chairman of the committee, elucidated that the rate adjustment is geared towards controlling the spiralling inflation, which stands at 31.7%, and managing the foreign exchange market more effectively. These bold steps by the CBN highlight its commitment to stabilising the economy and bolstering the naira’s value against the dollar.

Nairametrics