Business & Finance

Nigerian Naira Hits Record Low Against Dollar Amidst Calls for Policy Reevaluation

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Nigerian Naira Hits Record Low Against Dollar Amidst Calls for Policy Reevaluation

As the Nigerian currency, the naira, slumps to an unprecedented all-time low of NGN950 per dollar, economic experts are divided over its valuation and the root causes of its decline.

In a recent twist of events, the naira has seen a rapid and alarming depreciation against the US dollar, breaching the 900 per dollar mark for the first time. This concerning development follows the adoption of a new floating exchange rate regime in mid-June, a policy that some sources speculate Nigeria might consider abandoning due to its inability to curb the naira’s ongoing slide.

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The shortage of the greenback, both in the formal and informal markets, has been pinpointed as the primary driver behind the naira’s recent woes. The disparity between the supply and demand for the US dollar has created an environment conducive to the naira’s depreciation against major currencies, casting shadows over the Nigerian economy’s outlook.

READ ALSO: Dollar to Naira Exchange Rate in Black Market Today, 12 August 2023

Folashodun Shonubi, the acting governor of the Central Bank of Nigeria, has offered a contrasting perspective. Despite the grim financial performance of the naira, Shonubi believes that the currency is currently undervalued. He cited economic modeling, particularly focused on purchasing power parity, to support his stance. According to him, a comprehensive economic modeling of Nigeria would reveal that the naira is significantly undervalued, providing a unique angle to the ongoing debate.

Shonubi also underscored the role of diaspora remittances in the currency’s downward spiral. He expressed concerns that a portion of these remittances is being directed away from the formal foreign exchange market, exacerbating the naira’s decline. In a bold move, Shonubi pointed fingers at certain Nigerian banks for allegedly engaging in unauthorized dollar sales, further contributing to the currency’s depreciation. The acting governor warned that the Central Bank of Nigeria would soon intervene against any banks found guilty of such practices.

Meanwhile, the International Monetary Fund (IMF) has weighed in on the issue, attributing the naira’s predicament to Nigeria’s “loose” fiscal and monetary policies. The global financial institution’s representative in Nigeria, Ari Aisen, emphasized that the country’s path to stabilizing the naira lies in implementing tighter policies. This advice comes at a critical juncture for Nigeria, as it grapples with finding a solution to the currency crisis while striving to ensure overall economic stability.

The Nigerian government now faces a challenging task of striking a balance between its currency’s valuation and its broader economic policies. As the debate rages on, it remains to be seen whether the naira can regain its footing or if a more decisive policy shift will be required to restore investor confidence and prevent further depreciation.


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