By Oludare Mayowa
The Nigerian naira declined for the second consecutive day against the dollar after the Central Bank of Nigeria (CBN) abolished the dual foreign exchange market and allowed banks to trade freely in the market.
The local currency slipped against the dollar by 5.74 percent on Thursday on the Investor’s and Exporters’ (I&E) forex window in line with the CBN free float policy.
The naira depreciated as the dollar was quoted at N702.19 on the I&E window compared with the previous close of N664.04 to the dollar.
The CBN allowed the naira currency to drop as much as 36 percent on the official market on Wednesday in fulfillment of President Bola Tinubu’s pledge to align the exchange rate and do away with multiple exchange rates.
A web of multiple exchange rates under Godwin Emefiele had led to foreign currency shortages and made it difficult for investors to take out money from Africa’s biggest economy.
The removal of restrictions on the official market drove the naira to a record low of N750 to the dollar on the official market in early trade on Wednesday, down from Tuesday’s low of N477 naira to the dollar before it firmed to N664.04 a dollar.
This was the first time since 2016 that the naira recorded a big fall on the official market before the central bank introduced a managed exchange rate in 2017.
The local currency, however, closed at the parallel market at N757 to the dollar compared with N750 to the dollar close on Wednesday.
According to a Management Consultant, Femi Olabiyi, It was good that the central bank has abolished multiple forex markets.
“Let the government make a hedging mechanism such that the single market would not float outside the +/- 20 percent range in any business year. Currency stability is better than the wild fluctuations of the market.
“In addition, let the government improve our dollar revenues and reduce our dollar outlays by refinancing our huge dollar debt portfolio into longer-term debt derivatives.
“Foreign direct investments and remittances have been falling over time. This trend has to stop,” Olabiyi told Global Financial Digest.
He said technically, the naira has been devalued and added to the increase in fuel prices, Nigerians should expect a high cost of living.
“I foresee inflation and high interest rates of up to 25 percent to drive inflation down.
“Above all, we should consume local goods more and reduce our dependence on foreign goods.”
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