Nigerian Vice President Yemi Osinbajo recently warned that the exchange rate of the country’s official Naira N411 for every dollar is artificially low. This exchange rate, according to Osinbajo, discourages the entry of foreign currency into the country.
The Naira exchange rate needs to reflect the reality of the market
As a result, Vice President Osinbajo has said he wants the Central Bank of Nigeria (CBN) to allow Naira to “reflect market realities”. As reported by The Cable Details, Osinbajo also wants the CBN to reconsider its foreign exchange management strategy. He explained:
We can’t get new dollars into the system, where the exchange rate is artificially low. And everyone knows how much our reserves can grow. I am convinced that the demand management strategy currently adopted by CBN needs to be reconsidered, and this is my view.
Nevertheless, Osinbajo suggested that such a reassessment should be done only when the CBN governor has time to resolve the issue.
Since the first half of 2020, Naira has been devalued against major currencies such as the US dollar and the British pound. At the time of writing, the USD exchange rate from the official Naira stands just above 411 per dollar. This exchange rate is about 40% lower than the 570 Nair parallel market rate per dollar.
Despite this discrepancy between the official rate and the Naira black market exchange rate, the CBN has so far refused to devalue the currency. Instead, the central bank has gone after individuals and companies accused of fueling the Nair slide.
Meanwhile, Osinbajo warned the CBN against interfering in the financial part of the economy. However, if such an intervention is needed, the CBN must act only if it has the “full cooperation and consent of the Ministry of Industry,” Osinbajo said.
Do you agree with Vice President Nair’s sentiments? Let us know what you think in the comments section below.
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