Naira depreciates as dollar scarcity hits forex market

Nigeria’s local currency, the Naira on Wednesday morning dropped value against the US Dollar, selling for N446 as against the N445 it sold for a Dollar on Tuesday.

Lately, at the forward market, the naira recently depreciated exchanging at an all-time high against the dollar, with the 5 years non-deliverable forwards falling to N570/$1 from N413/$1.

Reacting to the continuous Dollar scarcity and shrinking forex liquidity in Nigeria’s currency market, Thelma Ugonna Ohiri-Anyanwu, CFA a leading financial expert in Nigeria’s tier 1 bank called for monetary policy stakeholders to readjust the value of the Naira.

He said devaluing the Naira would make importation more expensive and encourage exportation of goods by local manufacturers which in the long run will increase the dollar inflows, thereby leading to the strengthening of the Naira.

“Nigeria’s central bank needs to remove the current ban on forex allocations for the importation of goods and rather implement trade policies that would increase tariffs on luxurious imported goods and give subsidies to local manufacturers who export their products.

This would encourage local producers to be more creative, improve their products, and export these products, leading to an increase of improved domestically produced products, thereby, diversifying the economy and reduce the country’s reliance on the China economy.

It would be recalled that the Central Bank of Nigeria recently resumed the provision of foreign-dominated currencies to commercial banks based in the country.

The apex bank said the resumption of the exercise was for onward sales to small and medium enterprises (SMEs) wishing to undertake the importation of essentials needed to help revamp the economy devastated by the deadly COVID-19  pandemic.