The naira’s recent downward trajectory in the parallel market has prompted action from the Central Bank of Nigeria (CBN). The bank is rolling out measures to stabilize the currency, focusing primarily on curbing speculative demands.
After discussing the currency’s instability with President Bola Tinubu, Acting CBN Governor, Folashodun Shonubi, emphasized that the naira’s fluctuations weren’t purely due to economic factors. Instead, speculative actions were exacerbating the situation.
In a move to counter these challenges, the CBN released guidelines setting boundaries on exchange rates for diaspora remittance payouts. This is aimed at alleviating the pressure on the naira in the parallel market.
However, concerns loom large as the CBN’s recent financial disclosures indicated less available foreign-exchange reserves than previously reported. This revelation has implications for the CBN’s ability to defend the naira’s value.
Making matters more complex, Nigeria hasn’t seen any earnings from crude oil sales for about seven months, further straining the foreign exchange situation. This lack of revenue, coupled with declining oil production, has placed additional pressures on the economy.
Nigeria has experienced a notable gap in its gas sales, with no recorded revenue from November 2021 to March 2023. Crude oil sales have traditionally been Nigeria’s primary source of foreign exchange (forex). The absence of this crucial revenue stream has caused significant forex scarcity in the country.
This deficit seems to have forced Nigeria to resort to external borrowing to keep up with demands and stabilize its external reserves. The Central Bank of Nigeria (CBN) reported a moderate month-by-month decline in the nation’s gross official reserves, dropping by $167m to approximately $34.0bn by the end of July 2023. This dip follows a more pronounced fall of $975m the previous month.