To be sure, the unified exchange rate will depreciate further if oil prices continue to drop; but this will be because Nigeria’s national income is falling and not because of the currency float. These parallel markets have resurfaced in recent years, usually in countries with serious problems in economic governance. This is a timeline of every decision taken since the first devaluation. DEVALUATION OF NAIRA PROPHECY: On February 19th 2017, Prophet TB Joshua gave a prophecy regarding the devaluation of the Nigerian Naira currency. Any reprieve Nigerian agriculture might have received after oil prices collapsed in the early 1980s never materialized because of bad exchange rate policy during the first Buhari regime. But the official rate has been held at its April 2015 level of 197 while the parallel market premium (the difference between the official and parallel market exchange rates) has skyrocketed ten fold to 80 percent from 8 percent in April 2015. 4. President Buhari’s intransigence and Mr. Emefiele’s hyperinflationary fears are unfounded because domestic goods pricing already reflects the parallel rate. Directly after the peg was abandoned on 20 June, the currency lost over 40% of its value against the USD and fell to 282 NGN per USD. It must float the Naira to help its fiscal accounts and to prove that it can learn from its own past mistakes. Earlier, on December 15, South Sudan’s central bank dropped its fixed exchange rate. At the same time, the parallel exchange rate provided N5 for one dollar. While the Central Bank had pledged to move But a 1985 World Bank survey showed that domestic prices of traded goods were more likely to reflect an exchange rate of 5 naira to the dollar. However, there would be no inflationary burst because domestic goods prices already reflect the parallel rate. The naira has been continually devalued since its inception in 1973, and inflation remains above 10% as of 2019. The official price of the dollar shot up by over 500 percent, from 2.95 South Sudanese Pounds per dollar to the parallel market rate of 18.50 per dollar. The official naira-dollar exchange rate had depreciated by 21 percent over this period, to 197 naira per dollar from 162.8 naira per dollar. Most of my then colleagues at the World Bank and IMF believed an equilibrium exchange rate of close to 1.5 naira to the dollar would emerge from the auction because Nigeria’s oil dollars (the bulk of foreign exchange earnings) were allocated at the official rate. By April 2015, when CBN reintroduced foreign exchange rationing with restrictions on credit cards, the dollar oil price had fallen some 40 percent from its peak in June 2014. What is Naira Devaluation? Brethren! A Nigerian newspaper and Online version of the Vanguard, a daily publication in Nigeria covering Nigeria news, Niger delta, general national news, politics, business, energy, sports, entertainment, fashion,lifestyle human interest stories, etc. On December 17, 2015, Argentina’s peso depreciated sharply, with the official exchange rate rising to 13.95 pesos per dollar from 9.8 pesos per dollar, much closer to the parallel rate of 14.5, after a new administration floated the currency. Direct access to our calendar releases and historical data. Publish your articles and forecasts in our website. “The inflation has already occurred through the parallel market. In September 1986, the parallel exchange rate in Nigeria was 5 naira per dollar, implying a premium of 230 percent over the official exchange rate of 1.5 naira per dollar. Instead of letting the naira depreciate in line with falling oil prices, CBN introduced rationing via an import license system. Any inflationary impacts would come from the fiscal consequences of the float. The Central Bank of Nigeria may have devalued the naira by as much as 15 percent with the introduction of a single exchange rate. What is Naira Devaluation? This was seen as a key step in reestablishing macroeconomic policy credibility which has been in tatters since Argentina’s sovereign default of 2001. The Finance Director of Nigerian Breweries Plc, Rob Kleinjan, has revealed that the increase in the brewer’s costs of goods was due to the devaluation in naira and FX scarcity, which led to the increase in the cost of inputs such as sorghum and sugar, as they are not fully produced locally. The minimum depreciation in any decade is 34%. Aliko Dangote, president of the Dangote Group, says the devaluation of the naira will not affect the food fortification targets set by leaders in the Nigerian food industry. The adverse effects of devaluation are humongous and insidious: Apart from massive unemployment and hyperinflation, the prices of food and essential commodities will be too expensive; beyond the reach of the suffering masses in a nation where 85 percent of the population survived with … The Nigerian Naira is expected to trade at 380.50 by the end of this quarter, according to Trading Economics global macro models and analysts expectations. The day before, it bled. Effect of Devaluation. In other words, the market had already corrected itself without action from the policy makers. In September 1986, the parallel exchange rate in Nigeria was 5 naira per dollar, implying a premium of 230 percent over the official exchange rate of 1.5 naira per dollar. Quick History. The United States (US) adopted Saturday a “new official” map of Morocco that includes the disputed territory... NdaniTV has released the official trailer for its brand new series, GAME ON. How did Nigeria get to that point? According to the famous quote from the philosopher George Santayana, “those who ignore history are doomed to repeat it.” Thirty years ago in 1986, Nigeria’s policy makers made the exact same argument against devaluing the naira under extreme pressure from a similar oil price collapse. NGN to USD currency chart. Returning to a market-determined exchange rate via a float would probably lead to a new exchange rate close to that in the parallel market. Devaluation of Naira on Nigerian Economy 3.Economic growth might increase. Oil proceeds, which is a major source of revenue sharing for the government is deposited at the CBN and then converted to naira using the official exchange rate of N360/$1. Kept at a steady rate of $360 by supporting the demand with Naira injection and ... Andrei Tapalaga ️ in History of Yesterday. Kalu said, “Supply is king. For the benefit of those of us who do not know much about economy.Can the Economists in the house enlighten us on naira devaluation, the implications and the ripple effects and why the president is reluctant in doing that.in a simple language pls. The quotes above from Governor Emefiele and a paper on Nigerian economic policy written in 1987 indicate that history has come full circle once again. The official rate was irrelevant from the perspective of the average consumer. In September 1986, the parallel exchange rate in Nigeria was 5 naira per dollar, implying a premium of 230 percent over the official exchange rate of 1.5 naira per dollar. Nigeria must stop selling its valuable oil dollars cheap. What purpose then would be served by an exchange rate adjustment?”. The recent devaluation is “a step in the right direction,” said Temi Popoola, head of Nigeria at Renaissance Capital in Lagos. The naira has witnessed relative stability, moving within a narrow band of N359-N370/$ since mid-2017. Naira Devaluation History The history of the naira shows that it has always depreciated since its inception. Technical Feedback: whatsapp 08023469027 Speculations started March 12 that the naira might be devalued. The Naira was resilient and enduring, … Thirty years ago, as a young economist at the World Bank, I studied foreign exchange markets across the developing world, including in Nigeria. Second, giving dollars at the official rate to importers meant handing them an instantaneous unearned profit of 3.5 naira (the difference between the parallel rate of 5 and the official rate of 1.5) per dollar received from CBN. Understanding the NGN (Nigerian Naira) … The Trading Economics Application Programming Interface (API) provides direct access to our data. Two respondents said it was at least 20% too … “You don’t understand,” he chided me. Looking forward, … This led to a series of steps to lower the fiscal deficit and eventually CBN was persuaded that it would be a good idea to unify the official and parallel exchange rates. This is not the first time Nigeria’s currency has been devalued because of the drop in oil price. Even if $1 becomes N200, 000, if supply exceeds demand, the value will fall.” However, it is more of a result of the American government taking control of its currency exchange rate, which is against the rules stipulated by Bretten … Oil prices fell another 48 percent between April 2015 and January 2016. Moreover, this “profit” was at the expense of the Nigerian government. Parallel markets for foreign exchange (typically illegal) were rampant in Africa and Latin America during the mid 1980s. This fact had three important implications: First, the parallel exchange rate was the equilibrium exchange rate. Fortunately, exchange restrictions were phased out later in 2009; but not before the CBN burned $17 billion to artificially prop up the naira. Nigeria Trade Balance Swings to Gap in September, Nigeria Private Sector Growth Slows to 4-Month Low, Nigeria Economy Slips into Recession in Q3, Nigeria Services Sector Shrinks for 8th Month, Nigeria Factory Activity Stabilizes in November, Nigeria Inflation Rate Quickens for 14th Month, Fitch Revises Nigeria Credit Outlook to Negative, Oil Prices Slide on Friday, Book Weekly Gain, US Stocks Book Weekly Loss, S&P Links Third Fall, Senegal November Inflation Rate at 5-Month Low, Spanish Shares End Lower, Fall 3.1% on the Week. Agriculture, once a mainstay of the economy and of non-oil exports, collapsed because of competition from cheap imports and neglect. The medium term outlook for oil prices remains bleak. These were his words: “The Bible says where there is no vision, people perish. This meant that private individuals with access to government could easily enrich themselves at the expense of the Nigerian people. The chart below shows the value of the naira on the official and parallel markets against the decline in global oil prices. Nigeria’s latest devaluation of the official naira rate -- one of the West African nation’s multiple exchange rates -- has left traders perplexed. How Technology is Helping People Working from Home? To my nation Nigeria - last two years, there was a vision, a prophecy for the nation, which is still going on. Despite efforts of the Government, it was not possible to hold these prices. The sudden change in the exchange rate in 1970 and 80s is not entirely down to what Nigerian government did. The present situation is eerily similar to that which prevailed 30 years ago. The country is an oil exporter and embroiled in conflict. Nevertheless, CBN resisted devaluing the naira, arguing ironically that no useful purpose would be served because oil was virtually the only export!   Naira devaluation history Bismarck Rewane, said a combination of naira devaluation and forex controls by the CBN would save the country. This argument is incomplete and ignores many important issues: the credibility of macroeconomic policy; subsidies for the rich hidden in the overvalued exchange rate; and the constraints placed on pricing and production  by new restrictions pushed by policy makers hoping to regulate their way out of the current currency crisis. Over the ten-year period from 1973-1983, the Nigerian government directed very little public spending towards agricultural research and development or enhancing rural infrastructure, unlike in similarly oil rich countries such as Indonesia which spent heavily to improve non-oil sources of revenue. This Christmas season I had intended to engage in a critical investigation of religion given the powerful theological si... By Douglas Anele In spite of efforts to clean up the electoral process, rigging, violence and electoral manipulation of... By Denrele Animasaun ‘The writer cannot be a mere storyteller; he cannot be a mere teacher; he cannot merely x-ray socie... Naira devaluation or doom: Is Nigeria’s economic history repeating itself? This period of naira stability was preceded by the introduction of the Investors and Exporters FX window in April 2017 and supported by a notable recovery in global oil price (2017 Brent price: 16.0% YoY to $54.77/barrel), following the collapse of the latter in 2016. After decades long of word counts and verbal exchanges on Naira devaluation and “oil subsidy removal”, yours sincerely is truly contestation weary on the twin policy issues. Yet both have taken steps to eliminate parallel foreign exchange markets through appropriate, market-based exchange rate policy. Nigeria’s fiscal accounts and policy credibility will receive a much-needed boost from exchange rate unification. Trading Economics members can view, download and compare data from nearly 200 countries, including more than 20 million economic indicators, exchange rates, government bond yields, stock indexes and commodity prices. Third, if the central bank were to unify the official and parallel rates by floating the Naira, this would lead to a large depreciation as the official rate merged with the equilibrium parallel rate. As a result of large fiscal and current account deficits during the boom period of 1973 to 1980, Nigeria’s foreign debt had grown to $19 billion by 1985. It appears that Mark Carney, the former Governor of Bank of England might be right when he emphatically stated that currency “depreciations are how you make the economy poorer”. In June, CBN declared 40 imported items as “not valid for foreign exchange in the Nigerian foreign exchange markets” purportedly to “conserve foreign exchange reserves as well as facilitate the resuscitation of domestic industries and improve employment generation”. The items range from toothpicks to private airplanes and jets. But it could also be capturing growing risk from macroeconomic uncertainty linked to the stop and go exchange rate policy: CBN was slow to let the naira depreciate when oil prices started falling with the onset of the global financial crisis in late 2008. COVID-19: N149bn to 317 beneficiaries The naira/dollar exchange rate and the government’s policies to address the issue has a long history behind it. 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The naira has been weakening against the U.S. dollar since June when the Central Bank scrapped the currency peg that had kept it at an artificially-high value of around 198 NGN per USD for over a year. In contrast, Nigeria has taken steps to ration foreign exchange instead of letting the market determine the exchange rate after oil prices began their most recent fall. DECEMBER 10, 2020 Naira Devaluation As False Economics - LEADERSHIP DECEMBER 10, 2020 FG crashes data price by 50 percent - THE NATION DECEMBER 10, 2020 British pound falls about 0.5% after Johnson-von der Leyen meeting - RUETERS DECEMBER 10, 2020 My account frozen over N30,000 protest donation –#EndSARS campaigner - PUNCH DECEMBER 10, 2020 Naira Bounces … While the USDNGN spot exchange rate is quoted and exchanged in the same day, the USDNGN forward rate is quoted today but for delivery and payment on a specific future date. The naira was introduced on 1 January 1973, replacing the Nigerian pound at a rate of 2 naira = 1 pound. In November 2014, the CBN similarly devalued the naira from N155 per dollar to N168/$1 and further to N199/$1 following the falling oil prices and subsequent dwindling international reserves, . There was a government … I vividly remember my 1985 conversation with an importer: “Would not there be an inflationary burst if CBN were to float the naira?” I naively asked. XE’s free live currency conversion chart for Nigerian Naira to US Dollar allows you to pair exchange rate history for up to 10 years. For Nigeria the impact would be a positive lowering of the fiscal deficit and therefore, inflationary pressure. It bled yesterday. Download historical data for 20 million indicators using your browser. 1995-2020 Data | 2021-2022 Forecast | Quote | Chart | Historical. 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The naira presently trades at 360 to the dollar. On the 20th of February 2016, Nigeria’s President Buhari hardened his stance against devaluing the Nigerian Naira because he believes devaluation will not help the country “as it had few exports apart from oil and depended on imports whose cost would rise with such a move.” This view is shared by Governor Emefiele of the Central Bank of Nigeria (CBN), who noted on 17th November 2015 “Our major export commodity which accounts for more than 80% of our income is crude oil…and what is supposed to be the non oil export, we are not producing effectively.” CBN governor, Emefiele, also warned that that naira devaluation would lead to hyperinflation. 2. We hate to be the bearers of bad news (or to be super dramatic by quoting Shakespeare’s Macbeth) but something potentially wicked this way comes.The thing in question is called Naira Devaluation and from the looks of it, it’s going to kick everyone’s asses. By the mid 1980s, oil prices had collapsed from a supply glut following the oil price hikes of 1973-74 and 1979-80. The main questions then: “what exchange rate would emerge from the float?” and “would there be an inflationary burst?”. The investment climate in manufacturing and agriculture will improve dramatically with the elimination of the hidden tax from the parallel market premium. This meant a huge hidden tax on agriculture, since procurement prices were set with reference to the official exchange rate and little attention paid to international prices. The devaluation of the naira against global currencies will impact negatively on foreign currency loans and weaken capital base for the lenders, banking sector report has … Argentina and South Sudan are examples. The powers at the time said: “Oil is dollar-denominated and virtually our only export. It decimated non-oil exports and inexorably transformed the Nigerian economy over time into the “mono-economy” referred to by current Central Bank Governor Mr. Emefiele. The coins of the new currency were the first coins issued by an independent Nigeria, as all circulating coins of the Nigerian pound were all struck by the colonial government of the Federation of Nigeria in 1959, with the name of Queen Elizabeth II on the obverse. It is apparent that the parallel exchange rate is driven by the oil price, since oil accounts for 70 to 80 percent of government revenues and the lion’s share of Nigeria’s exports. According to the governor, the Naira had already been devalued by about 28 per cent this year, just like many other currencies of the world. The quotes above from Governor Emefiele and a paper on Nigerian economic policy written in 1987 indicate that history has come full circle once again. In January 2009, it virtually shut down the interbank foreign exchange market, fuelling a significant parallel market premium. The USDNGN spot exchange rate specifies how much one currency, the USD, is currently worth in terms of the other, the NGN. READ our Privacy-policy and cookie policy. However, by 1985, the economy was in a bad state with Nigeria’s foreign creditors insisting on an IMF program for rescheduling a relatively small sum of $2 billion. kalu Aja, a financial analyst also said the country needs to build- up supply for dollar in order to end the naira devaluation streak. An imported good costing one dollar was more likely to sell for 5 naira (the parallel rate in September 1986) than 1.5 naira (the official rate). Hence, an analyst once said, only a fool keeps all his wealth in naira. Currencies Nigeria’s forex devaluation timeline – 2020. In 1986, the official rate of Naira to Dollar was about N1.5. Download Vanguard News App. And with further devaluation of naira the scarcity of dollars and pounds will greatly magnify. The CBN’s latest devaluation suggests more money for the government as the conversion rate is now N379/$1. All but four of the survey participants said the naira is more than 10% overvalued against the dollar. With the parallel rate at 360 naira per dollar, this hidden tax on non-oil exporters currently stands at 45 percent. It allows API clients to download millions of rows of historical data, to query our real-time economic calendar, subscribe to updates and receive quotes for currencies, commodities, stocks and bonds. This also made Nigeria the last former British colony to abandon the £sdcurrency system in favour of the decimal currency system. Do NOT follow this link or you will be banned from the site. This was perhaps the death blow to Nigerian agriculture and a big contributor to the growing concentration of oil in total exports. (vitag.Init = window.vitag.Init || []).push(function(){viAPItag.display("vi_949932995")}). Naira devaluation risky for foreign currency loans, says report – The devaluation of the naira against global currencies will impact negatively on foreign currency loans and weaken capital base for the lenders, banking sector report has shown. All CBN will be doing is to slash my profit!”. Nigerian Naira - data, forecasts, historical chart - was last updated on December of 2020. In addition, as noted above, the premium was a ruinous hidden tax on the once-flourishing agricultural sector. Despite the systematic Naira devaluation in the last 40years, Nigeria and Nigerians are yet to experience the goodies currency depreciation advocates promised. It decided to float the naira via an auction for foreign exchange. Programming Interface ( API ) provides direct access to our calendar releases and historical data 20. 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