Forex Rates Should Reflect Market Realities – Osinbajo Tells CBN

The current Forex rates in Nigeria seems to be unfavorable to most of the Traders and Exchangers, considering the poor Status of Nigeria Naira when compared to US dollars . Although the Naira observed to appreciates a little as before.

The Vice President Yemi Osinbajo on Monday made the statement during a speech at the Midterm Ministerial Performance Review Retreat which was held at the Banquet Hall, Presidential Villa, Abuja. said Nigerias official exchange rate is “artificially low”.

He further said that This, in my own respectful view, is the only way to improve supply. We cant get new dollars into the system when the exchange rate is artificially low. And everyone knows by how much our reserves can grow.

“So I‘m convinced that the demand management strategy currently being adopted by the CBN needs a rethink. All those are issues, I’m sure, that when the CBN Governor has time to address, he will be able to address in full.”

As of Last month, the CBN accused an online forex rate aggregator, AbokiFX, of manipulating parallel market prices to the detriment of the naira. The apex bank had vowed to go after the media outlet, forcing it to shut down the forex rates publishing aspect of its business.

However, the improvements has changed nothing in the Nigeria‘s forex market. Currently, the exchange rate remains $1/N570 and above in the parallel market, though the central bank’s rate remains N410.

However, like Osinbajo, experts have advocated that the CBN allow market realities to determine naira‘s fate. Last month, former CBN deputy governor Kingsley Moghalu, said the financial regulator should stop subsidizing the naira, Experts have also pointed at insufficient dollar liquidity as part of the reasons the naira is depreciating. Data from the CBN shows $116 billion to be the total dollar inflow to Nigeria’s economy in 2020, which compared to 2019‘s $142 billion and 2014’s $160 billion, has 20% and 30% drop in dollar inflow to the economy respectively. The drop in oil prices, which is Nigerias dominant source of revenue, is largely responsible for dollar scarcity in Nigeria. There is also the massive drop in diaspora remittances as people switch to cryptocurrency for cross-border transactions.

The issue of Forex scarcity and Naira Depreciation has been the topic of discussion starting from the day U.S Dollar appreciates more against the Naira. Un till now the CBN even though trying to provide a fair judgment to all, but yet to come up with a concrete idea to resolve the Forex rates issues in Nigeria.