The Nigerian Naira recently hit a historic low against the US dollar with an exchange rate of NGN860:USD1, due to a shortage of foreign exchange in the official market and an increase in forex demand. Consequently, the Central Bank of Nigeria (CBN) announced the cancellation of licenses for about 2,700 currency exchange offices.

The Disparity Between Official and Parallel Market Rates Expands

The Nigerian Naira reached its new lowest point of NGN860 per dollar in the parallel market on July 20. This decline has further increased the discrepancy between the import and export weighted average rate (NGN773:USD1) and the rate available in the black market.

Reuters reported that this drop in value followed the CBN’s decision to let the Naira float, a policy change that was made shortly after Bola Ahmed Tinubu took office as the president of Nigeria. It’s also noted that the depreciation of the Naira occurred just a week prior to the next CBN monetary policy committee meeting.

Licenses of Almost 2,700 Currency Exchanges Revoked

CryptokenTop.com News reported that the CBN initially devalued the Naira by 30% before letting it depreciate progressively against the US dollar and other major currencies. Some Nigerian financial experts have suggested that the central bank’s end goal is to unify the parallel and official exchange rates.

Nevertheless, the lack of US dollars in the official market and the rising demand for forex has put the Naira under increasing pressure.

In response, the CBN declared on July 20 that it had canceled the licenses of 2,698 currency exchanges. A local report indicates that this measure was taken by the central bank in an effort to control the impact of these exchanges on the Naira-to-dollar exchange rate.

To receive a weekly update on African news, register your email here:

African Crypto Newsletter
Subscribe

We would like to hear your opinion on this development. Please share your thoughts in the comments section below.

Frequently Asked Questions (FAQs) about Naira depreciation

Why did the Nigerian Naira hit a record low against the US dollar?

The Nigerian Naira hit a record low due to a shortage of foreign exchange in the official market and an increase in forex demand. This was further affected by the Central Bank of Nigeria’s decision to let the Naira float.

What was the Central Bank of Nigeria’s response to the Naira’s depreciation?

In response to the Naira’s depreciation, the Central Bank of Nigeria revoked the licenses of nearly 2,700 currency exchanges. This measure was aimed at controlling the impact of these exchanges on the Naira-to-dollar exchange rate.

What is the import and export weighted average rate?

The import and export weighted average rate is an exchange rate that reflects the cost of imported goods and the value of exported goods. In the context of this news, it is used to compare against the rate provided by the black market.

Why is the Central Bank of Nigeria aiming to unify the parallel and official exchange rates?

The unification of the parallel and official exchange rates could help reduce the discrepancy between these two rates, stabilize the forex market, and provide a more accurate reflection of the Naira’s value.

What is the meaning of “letting the Naira float”?

Letting the Naira float means that the Central Bank of Nigeria has stopped directly controlling the Naira’s exchange rate and is allowing market forces, like supply and demand, to determine the rate. This decision was made after Bola Ahmed Tinubu’s inauguration as the Nigerian president.

More about Naira depreciation

Newsletter

Subscribe my Newsletter for new blog posts, tips & new photos. Let's stay updated!

5 comments

Joe87 July 22, 2023 - 3:37 pm

Wow! never thought I’d see the day the naira hits this low. The govt has gotta do something, this is getting outta hand.

Reply
LagosGuy July 22, 2023 - 4:41 pm

I read somewhere that devaluation can stimulate export. But here, it seems like its all falling apart!

Reply
OluwaBless July 22, 2023 - 4:47 pm

it’s a tough time for all nigerians. pray for better days.

Reply
Naija4Life July 22, 2023 - 6:19 pm

They always devalue our currency then act surprised when it crashes. They don’t have a clue, do they?

Reply
EkoStar July 23, 2023 - 12:04 pm

If this isn’t a wake up call for our economy, I don’t know what is. We need strong policies and discipline. Not these band aid solutions.

Reply

Leave a Comment

* By using this form you agree with the storage and handling of your data by this website.

Follow us

CryptokenTop

CrypTokenTop is a website dedicated to providing comprehensive information and analysis about the world of cryptocurrencies. We cover topics such as Bitcoin, Ethereum, NFTs, ICOs, and other popular crypto topics. Our mission is to help people learn more about the crypto space and make informed decisions about their investments. We provide in-depth articles, analysis, and reviews for beginners and experienced users alike, so everyone can make the most out of the ever-evolving world of cryptocurrency.

© 2023 All Right Reserved. CryptokenTop

en_USEnglish