In 1973, when the Nigerian Naira was first introduced, it was prestigious and Two Naira was equal to One pound.
Ten years after the existence of Naira, it was exchange at N0.724 for a dollar. In 1994, Naira started depreciating and was exchanged at N22.33 per dollar. Another Ten years down the line, Nigerians exchange a dollar for between N127 to N130.
There has been a drastic inflation on exchange rates over the years and the Central Bank of Nigeria claims they are attempting to control the annual inflation rate below 10%. Today, one dollar equals 199.25 and one pound is equal to 287.43 Nigerian Naira at the normal exchange rate. The unofficial currency market known as the Parallel market, has even made the exchange rate worse as they sell a dollar at the whooping sum of N280.
Naira’s Parallel Fall
Following the implementation of the Central Bank of Nigeria’s downward review of foreign exchange sales to Bureau De-Change, the Nigerian currency on Monday depreciated further at the parallel market. CBN had earlier reviewed downward the 150,000 dollars offered weekly to BDCs to 10,000 dollars, while the number of licensed operators was reduced to about 1,000 from 4,000.
At the close of trading late Monday afternoon, 11th January 2016, the naira depreciated by N3 to geggt to N280 per dollar, compared with the N277 that was the exchange rate as of Friday, 8th January, 2016. The naira’s deep swing was also visible against other international currencies such as the euro which is now exchanged at N490.
The official exchange rate across the commercial banks remains at N199 to the dollar. Most of the parallel market operators attributed the scarcity of the foreign exchange to the CBN’s policy review and limited earnings from crude oil. A currency dealer in Lagos, Salisu Ahmad, said the naira depreciation followed limited supply of foreign exchange and a vacuum created by a CBN policy.
Check This Out: Nigeria Loses N80bn Daily To Smuggling Of Petroleum Products
The supply of foreign exchange has been limited since the first week of the year and the demand for dollar and other international currencies is very high. So what we are witnessing is that some operators are taking advantage of the situation,” Mr. Ahmad said.
Another parallel market operator, Kakia Mohammed, said further depreciation of the naira could be linked to the commercial banks’ recent offering of lower denominations of dollars to customers.
Commercial banks’ approach has also pushed numerous customers to chase limited foreign exchange available to BDC operators,” said Mr. Mohammed.
He also said some dealers had induced the artificial scarcity by refusing to sell foreign exchange on the speculation of a possible monetary policy by the CBN during the week.
Meanwhile since 2011, when the CBN increased key interest rate for 6 times, rising from 6.25% to 12%, it has been on the rise until 31 January 2012, when they decided to maintain the key interest rate at 12%, in order to reduce the impact of inflation due to reduction in fuel subsidies. However, this ply has not significantly helped the Nigerian Naira regain its value as it was in 1973.