The continuous weakening of Nigeria’s legal tender — Naira — in both parallel and official markets, in the past weeks, has put the Central Bank (CBN) Governor, Godwin Emefiele, under the attention and harsh scrutiny of the public. Recall Emefiele was once in the eye of the storm a few months back over purported plans to contest for the office of president under the auspices of the All Progressives Congress (APC) in 2023.
When Emefiele assumed duty as the head of the country’s apex financial institution in June 2014, many Nigerians expected clear-sighted efforts that will define the country’s economic landscape.
The continuous crash of the naira, however, portends really bad news for Nigeria on his watch, not only for inflationary pressures on the economy but for businesses, especially importers. The depreciation of the local currency has negatively affected businesses — most especially importers.
The naira has been on a free fall in recent weeks, depreciating to N430 per dollar at the official market, known as the Investors and Exporters forex window, and N710/$ at the parallel market popularly called the black market.
Nigerians lamented how the country’s naira has continuously weakened against the U.S. dollar.
Many business owners complain about how they’ve been unable to access the foreign exchange from commercial banks, which can only satisfy customers’ requests based on allocations from the apex bank.
Owing to the increased public outcry, the Senate during the week resolved to invite Emefiele. He was asked to appear before the Senate in plenary and address the lawmakers behind closed doors.
It also mandated the Senate Committee on Banking, Insurance, and Other Financial Institutions to assess the impact of CBN intervention funds meant to support critical sectors of the economy.
The resolutions were reached by lawmakers after the upper chamber considered a motion sponsored by Senator Olubunmi Adetunmbi (APC – Ekiti North).
The motion was entitled, “State of CBN Intervention Funds and Free Fall Of Naira.”
Coming under orders 41 and 51 of the Senate Standing Order, as amended, Adetunmbi bemoaned Nigeria’s economic reality amid an urgent call for “extraordinary measures.”
He noted that the CBN, through its numerous multi-sectoral intervention funds, had provided special funds to support critical sectors of the economy.
Adetunmbi explained that in view of such interventions, it had become necessary to assess the state of implementation and effectiveness of the funds deployed for the purpose.
The lawmaker recalled that the CBN, in 2021, placed an indefinite halt on forex bidding by BDC operators and importers over allegations of abuse and mismanagement.
He observed that the halt by the CBN had resulted in a spike in the exchange rate.
According to Adetunmbi, “the two instruments of Personal Travel Allowance (PTA) and Business Travel Allowance (BTA) could only serve less than 20 percent of the total forex demand by travelers and businesses.”
The lawmakers, however, did not fix a date for the governor to appear.
Unfortunately, the CBN has been long hit by scarcity of foreign currencies, especially the US dollar, as oil earnings, Nigeria’s major area of sourcing foreign exchange, dwindled due to a series of issues.
Since CBN’s clampdown of AbokiFX (the website that curates parallel market exchange rate) last year, buyers and sellers of forex have struggled to find a reference point for what the actual exchange rate should be.
But the country’s apex financial institution has often maintained that the parallel market is not the true reflection of the naira.
It also argued that the non-remittance of dollars to foreign reserves by the Nigeria National Petroleum Corporation (NNPC) was largely responsible for the naira’s free fall in the official and parallel markets.
NNPC and its subsidiaries are the sole managers of crude oil which accounts for more than 80 percent of Nigeria’s Foreign Exchange (forex) earnings.
“Considering Nigeria’s heavy dependence on oil exports for foreign exchange earnings and government revenue, the impact of the oil market crash severely affected the government’s naira revenue and other macroeconomic aggregates including economic growth.
Hence, the rate of exchange between the naira and other currencies has widened over the past few years.” the CBN said in a statement.
A recent announcement that Nigerians buying dollars with naira will be “arrested” made by Emefiele had sparked mixed reactions.
The warning by the CBN Governor was to those who sought to convert the naira from their accounts into foreign currencies for election campaigns and not those who seek to exchange the currency for legitimate purposes such as payment for tuition and other personal expenses.
Reiterating Emefiele’s position, the CBN spokesman also frowned at the conduct of unauthorised movement of funds within and outside the country, saying it would use tools at its disposal to check the movement of illicit funds.
While it appears that CBN has established a slew of policies aimed at reducing demand for Dollars and maintaining a reasonable exchange rate for the naira, it appears the policies are not yielding good results.
Although, analysts have argued that there is also a huge demand now for forex among students who want to pay their school fees and that most students resort to buying from the black market because of the long queue at the bank as a result of limited availability of foreign exchange.
They also blamed the continuous weakening of the naira on rising import bills, dollar savings, and the accumulation of cryptocurrencies by Nigerians who have lost confidence in the local unit due to its massive devaluation against the greenback currency.
Also, at a recent MPC briefing, Emefiele in response to a question on the impact of election spending said: “For election spending as far as we are concerned what we do is to monitor liquidity in the system and once we see that there is excess liquidity we will continue to use our discretionary powers to mop up liquidity in the vaults of the banks so that they will not get involved in speculative activities with those who want to speculate with the currency.