Nigeria’s currency is poised for its eighth straight day of losses and on track for its longest losing streak since 2020, less than two months before a presidential election.
The naira traded at 453.16 to the dollar as of 4:30 p.m. local time on Thursday in the spot market. The currency has dropped 6.3% this year in the official market, where the rate is tightly controlled by the nation’s central bank.
Nigeria has multiple exchange rates for different official transactions, and an unofficial exchange rate at which those who can’t access dollars from the Central Bank of Nigeria get their greenbacks.
In that unauthorized parallel market, where the dollar is freely traded, the naira exchanged at 737.92 to the dollar according to @naira.rates. That brings the differential between the official and parallel rate to 63%.
Management of Nigeria’s foreign exchange policy has come under focus as Africa’s largest economy prepares to hold elections in February. All of the three leading candidates including the ruling All Progressives Congress nominee Bola Ahmed Tinubu and his rivals, Atiku Abubakar of the People’s Democratic Party and Peter Obi of the Labour Party, have promised to end the country’s multiple exchange rate system if elected.
The central bank has resisted calls by both the World Bank and the International Monetary Fund to close the differential between the rates by allowing more flexibility in the official window.
The central bank’s use of multiple exchange rates “acts as an implicit tax levied by the CBN on federation revenue,” the World Bank said in a report in November, adding that the practice cost the government $144.1 billion between 2017 and the first quarter of 2021.
Credit: Yahoo News