Naira Weakens Sharply on Official Market
The Nigerian Naira has weakened sharply on the official market, pushing it above the street rate. The currency has been under pressure since the Central Bank of Nigeria (CBN) announced a new foreign exchange policy in April. The policy has caused a shortage of dollars in the market, leading to a sharp depreciation of the Naira.
CBN’s New Foreign Exchange Policy
The CBN’s new foreign exchange policy was introduced in April in an effort to reduce the amount of dollars in circulation and to curb speculation in the currency market. The policy requires all foreign exchange transactions to be conducted through the official market. This has led to a shortage of dollars in the market, as the CBN has not been able to meet the demand for dollars.
Impact on the Naira
The shortage of dollars in the market has had a significant impact on the Naira. The currency has weakened sharply on the official market, pushing it above the street rate. The Naira has depreciated by more than 10% since the policy was introduced. This has caused a significant increase in the cost of imports, as well as a decrease in the purchasing power of the Naira.
CBN’s Response
The CBN has responded to the weakening of the Naira by introducing a number of measures to support the currency. These include increasing the supply of dollars in the market, introducing a new foreign exchange window for investors, and introducing a new foreign exchange policy that allows for the repatriation of profits.
Impact on the Economy
The weakening of the Naira has had a significant impact on the Nigerian economy. The cost of imports has increased, leading to higher prices for goods and services. This has had a negative impact on the purchasing power of the Naira, as well as on the country’s balance of payments.
Outlook for the Naira
The outlook for the Naira is uncertain. The CBN’s measures to support the currency have had some success, but the currency remains under pressure. The CBN will need to continue to take measures to support the currency if it is to remain stable. In the meantime, the Naira is likely to remain volatile, as the market adjusts to the new foreign exchange policy.