This year, the naira has fallen by about 32% at the black market to ₦740 against the greenback. At the official rate, a.k.a Nigerian Autonomous Foreign Exchange or NAFEX, the naira has dropped by 5% to ₦446/$1.
Foreign exchange (fx) scarcity and the Central Bank of Nigeria’s (CBN) capital control measures have contributed to this decline.
Despite this wide gap in rates and multiple markets—Nigeria has up to four exchange rate markets—political influence has deterred the CBN from unifying these rates.
The FG’s obsession with a strong naira has tainted the CBN’s exchange rate management and credibility, leading it away from its primary mandate of ensuring price stability.
Warnings from multilateral institutions such as the International Monetary Fund (IMF) and World Bank to the CBN to reduce its interventions in the fx market have also fallen on deaf ears.
A volatile naira and high inflation rates, fuelled by the widening spread between the official and black market rates, have further discouraged investors and encouraged arbitrage.
For the CBN (i.e. monetary policy authority) to smoothly carry out its core mandate of price stability, it needs to be independent of