Key Takeaways
- Naira depreciates by more than 25% in the past month
- Central Bank not worried about the naira depreciation rate says, director
- Cryptocurrencies can be an alternative to the demand for Forex
The Naira has depreciated by more than 25% in the parallel markets since the CBN stopped sales of Forex to bureau du exchange firms.
As a result, the parallel exchange rate hit an all-time low of 535 to a dollar on September 9, 2021.
This is in contrast to the official CBN rate, which is 411 per dollar.
According to Mahmud, this growing disparity in the two rates does not pose a source of concern to the central bank.
However, Mahmud noted in a conference that the Central Bank is concerned about supplying the growing demand for dollars and building confidence in the financial system.
Nigeria continues to face shortages in foreign exchange due to the import-based nature of its economy.
The Central Bank has tried to keep up with the pace of demand but has been overwhelmed and taken measures to control the forex flow.
The Naira has been devalued several times since the first quarter of 2020, and the apex bank has introduced stiff restrictions.
However, these measures have only placed more strain on the Naira, and the spending power of the populace has reduced over time.
There have been calls within the country to adopt digital currencies as an alternative to reduce the demand for Forex.
Companies and merchants can use cryptocurrencies to pay for goods abroad at a cheaper rate and lower fees.
The central bank has proposed the e-Naira as an alternative, and it is expected to launch on October 1.
Nevertheless, the sentiment within the country is that the e-Naira will be unable to achieve any significant changes in the current financial system.
What do you think about the statements from the Central Bank director?
