Exchange rate crisis: An endless gamble
The Central Bank of Nigeria’s (CBN’s) decision to adopt the flexible foreign exchange (forex) policy on June 20, which devalued the naira by 40 per cent against the dollar, has come with dire consequences on the economy. With 10 different exchange rates in operation, businesses declaring huge losses, dwindling consumer purchasing power, rising inflation and dearth of the much-needed foreign capital inflows to ease dollar scarcity, the future of the local currency looks dim, writes COLLINS NWEZE.
An mid-November, Angelina Michael, a Lagos-based banker, decided to take her annual vacation in the United States. She applied for $4,000 Personal Travel Allowance (PTA) which her bank approved immediately. She got the foreign exchange (forex) at N315 to the dollar, using airline booking document as proof of her scheduled flight.
Within the same week, she made a second request of $4,000 from another lender which was also approved at N315 to dollar. As she considered the cost of the trip against her salary and her wedding coming up in just few weeks, she decided to suspend the trip, hopping that her fiancée will absorb the bill during her next holiday.
With $8,000 in her purse and no regulatory searchlight on her trail, she headed to the parallel market where the naira was exchanging at N485 to dollar. That seamless transaction fetched her N1.36 million profit.
Despite being serious financial crime, round-tripping has become rampant after the Central Bank of Nigeria (CBN) introduced the flexible foreign exchange (forex) policy which devalued the naira by over 40 per cent against the dollar and created huge gap between the official and parallel market rates.
Today, holidaymakers, pilgrims, manufacturers and even banks, are daily tempted by the huge gap between both markets which has widened as the naira faces huge depreciation against the dollar. The depreciation has stripped the local currency of all respect it enjoyed for years in the eyes and hearts of Nigerians.
The flexible forex policy, which removed the 16-month N197 to dollar peg against the dollar, restored the automatic adjustment mechanism of the exchange rate to enhance efficiency, liquidity and transparent forex market. It also allows only one single market structure where rates are expected to be determined by market forces, boost investors’ confidence and attract more dollars into the economy.
But, more than six months into its implementation, the naira has remained pressured in both the official and parallel markets, with little or no dollar available to defend the local currency. Throughout last week, the illiquidity in virtually all segments of the market pushed the naira/dollar exchange rate at the parallel market to an all-time low of N485 to the dollar. The naira exchanges at N305.5 to dollar in the official market, representing N184.5 gap between both markets.
The local currency might before close of the year or early next year, decline further to between N490 and N500 to the dollar in the parallel market as forex scarcity persists and the CBN cuts supply to operators.
The possibility of the naira hitting the N500 mark against the dollar has unsettled the Finance Minister, Mrs. Kemi Adeosun. She has been talking tough against forex speculators and parallel market operators as according to her, transactions parallel market transactions were behind the naira woes. The naira crisis, Mrs Adeosun said, was killing the economy. She has directed the CBN to eliminate the parallel market, which she claimed, has pushed the naira to dollar exchange to current status.
The Bureau De Change Operators of Nigeria (ABCON) President, Aminu Gwadabe, confirmed the claim that the parallel market has been turned to a conduit pipe where speculators and non-compliant commercial banks and Bureaux De Change (BDCs) engage in currency round-tripping.
According to him, some banks take advantage of the gulf between the official and parallel markets given that about 20 to 25 per cent of forex traded in the country come from independent sources like inflows from international oil companies, international money transfer operators, Nigerians in the Diaspora among others which are usually diverted into the parallel market.
Gwadabe took the minister’s call for scrapping of the parallel market as part of government’s plan to sanitise the market because of high level of proliferation of exchange rate. No fewer than 10 operational exchange rates exist, depending on the purpose and the market where the dollar is bought or sold.
He listed them as the budget exchange rate (N305/$); Form ‘M’ processing rate (N285/$); Inter-bank rate (N315/$) and International Money Transfer Operators (IMTOs) rate (N375/$)
Also, the BDCs rate (N399/$); Western Union (N450/$); Airline intervention rate (N355/$); pilgrimage rate (N197/$); parallel market rate (N485/$) and the CBN rate (N305.5/$).
The ABCON chief said there is currently a total dysfunction of the forex market, which became more pronounced after the June 20 implementation of the flexible forex policy, calling for the immediate harmonisation of the rates to give foreign investors the confidence to invest in the economy.
“I suggest a weighted average rate of between N350 and N400 to dollar to bring calmness to the market and attract dollar inflows into the economy. Once the exchange rate is harmonised, the parallel market will shape up,” he said.
Gwadabe insisted that there is currently no dollar liquidity for exiting foreign investors adding that in countries where the flexible forex policy succeeded, the government had control of over 90 per cent of dollar supplies and also had the political will to freely float the currency.
Speaking further, he said the gap between the official and parallel market rates was very worrisome.
His words: “As a Nigerian, anytime I see the gap increasing, I’m worried and I say that this gap has to be reduced. The rising gap between both markets is fueled by compromise. Nigeria is an economy where you see compromise. Speculators are the biggest challenge facing the naira.
“Don’t forget that speculation is on its own a business. Once the CBN follows one road, they will find a way to frustrate the policy and ensure the survival of their business. But with increased transparency and liquidity, the activities of speculators will be reduced and volume of parallel market operators will also be reduced. We should move from the era of dollar allocation to think of how to bring in the dollars”.
A chief Executive officer in one of the Tier-1 lenders likened the forex crisis to economic war. The bank chief said there are saboteurs ensuring that whatever policy introduced by the CBN to fix the forex crisis, was neutralised by those benefiting from the old order.
The bank official said: “They are the big currency speculators and financial sector operators profiteering from the crisis. They are the banks involved in round-tripping. Hence, no matter how genuine and well thought out the CBN’s polices were, its full and successful implementations always met a brick wall.”
The ongoing crisis in the forex market runs contrary to CBN Governor, Godwin Emefiele promises when he assumed office in 2014 to restore exchange rate stability and bring sanity to the troubled naira.
Chief Executive Officer, FMDQ Over-the-Counter Securities Exchange, Bola Onadele, who accused the CBN of using strong moral suasion to prevent the naira from depreciating to a market-related level, called on the regulator to let the currency float freely.
Onadele said the market’s dysfunction is hindering the country’s economic recovery by deterring inflows from foreign investors and hurting manufacturers dependent on imports.
Onadele said: “What’s happening now, it’s not even a managed float. I’m not sure what we’re doing. I don’t know the objective, the strategy and success benchmarks. The dealers and bank chief executive officers don’t want to be reprimanded. If they quote rates freely, they may be reprimanded by the CBN.”
“The average daily turnover in the spot market used to be $1 billion and now it’s less than $100 million,” said Onadele, a former chief dealer at the local unit of Citigroup Inc. in Nigeria.
“I don’t believe the parallel market is illegal any more. We have inadvertently legitimised it through some of our actions. It may no longer be as a small market as we used to think. If you have $1,000 to convert to naira, will you sell it at N305.5? No rational person will do that. You’ll sell to a Bureau de Change operator and get N485.”
Nigeria has been grappling with economic crisis since crude oil prices dropped by about 43 per cent from $100.35 throughout 2014 to $57.20 for the first six months of last year. It closed at $56.29 per barrel at the weekend.
Specifically, the drastic fall in crude oil prices, which constitutes the largest component of forex reserves has cut dollar earnings from about $3.2 billion monthly to about a billion dollars for the same period. The naira has also taken a beat, losing over 70 per cent of its value since January, and may continue to depreciate in both markets as dollar shortages persist.
The fall in crude oil prices has reduced Nigeria’s dollar earnings, making it difficult for the apex bank to fund imports. Record oil prices had helped Nigeria to build the largest currency reserves in sub-Saharan Africa, which peaked at $63 billion in September 2008. But, after attaining a record-high of $147 in July of that year, Nigeria’s crude oil prices – Bonny Light, have plummeted.
Goldman Sachs recently agreed oil could tumble as low as $20 a barrel, a level that would decimate the already heavily damaged economies of Nigeria, Saudi Arabia and Russia. The Organisation of Petroleum Exporting Countries (OPEC) predicts the price will not go back above $100 until 2040.
Managing Director, Afrinvest West Africa Limited, Ike Chioke, said the CBN’s attempt to centralise the inflow of forex to official channels through registered International Money Transfer Operators (IMTOs) and the interbank by suspending unregistered IMTOs while threatening to sanction individuals operating as international money transfer agents continues to constrain supply of forex to the parallel market.
He explained that the exchange rate at the interbank has remained broadly stable as a result of frequent interventions by the CBN. The naira/dollar spot rate opened the week at N305.50 to dollar as the CBN intervened with dollar supply. The interbank spot rate closed the week at N311.62 to dollar.
“In the futures market, investors continue to take advantage of the Over-the Counter (OTC) Forex Futures to hedge exposures to the Nigerian market in a bid to limit currency movement risk.
“In the interim, we expect that the exchange rate will remain pressured in the parallel market as activities seem to have a speculative form, whilst the CBN continues to exclude 41 items from access to the official forex market. Accordingly, we expect the CBN to continue daily interventions at the interbank,” he predicted.
Dollar scarcity has also been linked to market uncertainty, with many dealers not sure how low it will fall in the near term and are therefore holding on to their hard currencies to watch the market direction.
These weak economic indicators and forecasts have continued to put the local currency under severe pressure from internal and external factors but the CBN is not giving up, except that its measures seem overboard, with varied implications on the economy. The continuous decline in the value of the naira has also been fueled by other unfavourable economic variables including the rise in the country’s import bill, inflation figures which rose for 13 straight months to 18.48 per cent in November and the unwillingness of foreign investors to inject fresh capital into the economy.
Why are investors elusive?
Former CBN Governor and now Emir of Kano, Sanusi Mohammadu II, said it will be difficult to invest in an economy with multiplicity of exchange rates.
“There is one rate for petroleum marketers, there is interbank rate, there is another for money market operators such as Western Union, MoneyGram, there is BDC rate and there is a special rate you get when you call the CBN for a transaction and so on,” he said.
Gwadabe agreed with Sanusi. Recalling when the crisis started: “It started in June 2016 when the flexible exchange rate was introduced. Today, 2,500 BDCs get $8,000 weekly from the IMTOs’ funds, which is about $20 million. However, the level of liquidity needed to boost the forex market and stabilise the naira is $50 million weekly.
“What is needed to rescue the naira is return of investors confidence and recovery in crude oil prices. Like Sanusi explained, with multiplicity of exchange rates, no investor will come into the country.”
An economist, Bismark Rewane, explains why the naira is on the downside. “As oil prices dipped, the CBN has prioritised stability of exchange rate in the official market. It has drawn an exclusion list of avoidable imports from being funded in the official market. With the forex demand for the items transferred to the parallel market, rates in that market have soared”.
Besides, other factors like terms of trade, inflation differential, public debt, current-account deficits, interest rates, political stability and the overall economic health determine the exchange rate of a currency.
deepen policy pains
The Manufacturers Association of Nigeria (MAN) lamented that its members lost N500 billion to the flexible forex policy.
Its local Chairman in Apapa, Babatunde Odunayo, who spoke during the branch’s 45th Annual General Meeting (AGM) in Lagos, said Letters of Credit (LCs) and Form ‘Ms’ approved to manufacturers at N197 to dollar before the policy implementation, are now expected to be redeemed at N305.5 to dollar.
“Unfortunately, this unfolding situation poses a great burden on manufacturers since the pricing of the related manufactured goods was made at N197 or N198 to dollar when it was approved. Manufacturers currently face up to N500 billion in exchange difference between the approved Form M and LCs established rates and the flexible market rate of N305.5 to a dollar. This is a huge loss that manufacturers are expected to bear,” Odunayo said.
“Many of our members are in the middle of factory projects execution, but the viability of such projects is now questionable due to the forex developments,’’ he added.
But instead of the manufacturers bearing the financial burden as predicted by Odunayo, it is the consumers that are now paying through higher prices, leading to higher inflation and reduced consumer purchasing power.
Dangote Group President Aliko Dangote also said his company lost N50 billion to the flexible forex policy. He spoke when Vice President Yemi Osinbajo toured the project sites of Dangote Fertiliser and Dangote Refinery in Lekki, a Lagos suburb. “We have been badly affected like any other company,” he said, arguing that operational costs totaled $100 million each month due to recurring expenses, such as the purchase of parts for cement production and running a fleet of 9,000 trucks.
Dangote said the decline had pushed up costs. “This devaluation alone, we have lost over N50 billion ($176 million),” he said.
“The gas, which is our main source of power, is priced in dollars. If there is 40 per cent devaluation, your price will go up by 40 per cent. Every single aspect of the production will go up by that percentage,” he said.
Interswitch Limited, a debit card company, suspended plans to raise $1 billion in an Initial Public Offering (IPO) as investors fret over further potential weakness in the naira and forex shortage.
The company had last year, met with Bank of America, Barclays Plc and Standard Bank Group about a potential 2016 share sale in Lagos and London.
Interswitch Chief Executive Officer, Mitchell Elegbe said the IPO would have enabled London-based private equity group Helios Investment Partners LLP, a shareholder, to return some money to investors.
“The macroeconomic situation in Nigeria has led to the IPO delay. Potential investors are jittery about the naira exchange rate and whether they will be able to buy forex to get their money out of the country when they want to exit,” he said.
Household spending dips
The economy was on crutches in the first and second quarters Gross Domestic Product (GDP) by expenditure data released by the National Bureau of Statistics (NBS) late last month. For the two quarters, decline in household consumption expenditure which contributes more than 60 per cent to normalised aggregate spending in the economy accounted for much of the GDP contraction in the period under review.
In the first half of the year, household and government consumption expenditure fell by 21.5 per cent and 18.6 per cent year-on-year in real terms to N18.9 trillion and N1.6 trillion respectively. The sharp contraction in consumption spending reflects weak fiscal revenue and steep increase in consumer prices pressuring household disposable income.
Net export also outperformed in real terms, growing nine per cent year-on-year to N6.2 trillion in June 2016, although mostly due to high prices of crude oil captured in benchmark base year of 2010 currently being used for real GDP measurement. In nominal terms, net export was in deficit as imports exceeded exports. However, the policy has helped Nigeria’s trade deficit to narrow following increased exports in June, the NBS data have shown.
BDCs also hit
The state of the local currency is also adversely affecting BDC businesses. On June 20 when the flexible forex policy was introduced, N6 million could buy $30,000. Today, it can hardly buy $10,000. The capital base of BDCs has been eroded by the rising cost of dollar.
Gwadabe said the BDCs needed more capital to continue and remains in the business. Speaking on dollar hoarding going on in the economy, he said: “Many Nigerians are buying and storing dollar in their bank accounts waiting for the rate to rise.
He said that investors have refused to invest in the country despite the devaluation of the naira adding that it would have been better, had the June 20 devaluation not done.
He said: “It was a hard trick. The foreign investors want the naira to exchange at N600 to the dollar. The banks are not transparent on dollar disbursements. The big question is how do we bring in new investors? They seem to be elusive. If the foreign investors come, that will be the end of currency speculation. But they have refused to come”.
More stakeholders speak
Sub-Saharan Africa Economist at Renaissance Capital (RenCap), Yvonne Mhango, said in a report titled: “Nigeria: Winds of change- more flexible forex policy” predicted that the naira would not be allowed to fully float on the interbank market.
“This view is informed by the partial deregulation of petrol prices on May 11, and Nigeria’s history of managing the forex rate. The ideal scenario would be for the CBN to let the market set the new interbank forex rate without restriction, and in so doing, allow for an appropriate level to be found.”
Mhango predicted that consumption expenditure will continue to underperform (and weight on aggregate GDP in the near term due to declining real wage and increasingly thrifty consumers wary of uncertain economic outlook and also taking advantage of high interest rate environment to save.
“We believe policy measures to ease supply side shortages in the economy – particularly for forex – and subsequent easing of monetary policy will go a long way in stimulating investment and consumption spending to support aggregate economic performance and naira’s recovery,” she said.
Managing Director/Chief Executive Officer, Tempo Paper & Packaging Limited, Seun Obasanjo, said the flexible forex policy implementation has increased energy prices and Customs duties.
Obasanjo said consumers of local goods should prepare to absorb a rise in cost of products, as higher cost of energy and Value Added Taxes (VAT) are incorporated into the prices of goods.
He said that the policy has eroded the people’s purchasing power, adding that the country is not out of the woods. He said the Customs calculate duties on imported raw materials using the official rate which moved from N197 to dollar to N305.5 to dollar.
The manufacturer said the Customs has already adjusted its template of duties, which means more revenues for government. “Customs revenues will continue to jump in the months ahead but manufacturers are going to pass the higher duties’ to consumers. It is painful but we have no other choice,” he said.
Continuing, he said that although the policy was meant to attract Foreign Direct Investment (FDI), but it may not come. “FDI may not come. Even if there are FDI inflows, that will not save the economy. Diversification of the economy is the answer and people should start patronising Made in Nigeria goods,” he said.
He believes that to get the local industry into the league of players where it can begin to act with full capacity in the production of goods and services, government needs to step in big time by providing the needed infrastructure.
“It is not a one direction approach. All hands must be on deck to get Nigeria to its desired destination of being an industrilised nation. By fixing power alone, the cost of production of goods and services will drop significantly, helping the operators to compete in the global market. The same thing applies to low interest rate which is needed to make the manufacturers also compete favourably by reducing the cost of their operations,” he said.
Continuing he said: “If I am producing everything in Nigeria, it means Nigerians will be employed starting from drivers, cooks, secretaries, cleaners, gardeners and even security personnel. That is a major contrast if the goods are imported. By producing goods locally, so much value will be added to the domestic economy.
“If the farmers are producing locally, it will improve their capacity overtime and also creates job. It will help Nigeria to leapfrog from consumption-based economy to production-based economy. We can even become a net exporter of several items”.
On other benefits to local production, he said that being the net exporter of goods and services, places the country in a vintage position to earn huge forex. Hence, instead of scrambling to buy dollars, the manufacturers can earn dollars and boost the domestic currency.
But achieving this, Obasanjo said, will require the co-operation and support of all stakeholders. “It has to be a coordinated effort and the policy needs to be encouraged. The support should come from all stakeholders. Although some people are going to lose out in the short-term because they are importing these items, but if we boost the local production capacity, in the long-run, we will all be better off,” he promised.
Exporters, expatriates benefit
The Managing Director, SilverPoint International Limited, Adebola Akindele, who exports cashew nuts to Turkey and United Kingdom (UK), said the flexible forex policy and the devaluation that came with it meant that dollars earned from exports enjoy greater value at home.
“Naira devaluation is creating more millionaire-exporters than ever before. We now have more naira after exchanging our dollar earnings,” he said.
Akindele said that although value from dollar inflows have risen, but exporters are not immune to rising cost of production, especially energy prices which not be passed to foreign buyers because of the controlled global pricing mechanism.
Also benefiting from the devaluation are multinational oil companies and their expatriate workers, whose salaries are in dollars. People who receive forex through Western Union and MoneyGram are also to benefiting from the naira woes and Nigerians in the Diaspora who send dollar remittances home are benefiting from the naira slide. Already, dollar remittances from Nigerians living abroad rose from $21 billion in 2015 to $35 billion this year following depreciated naira value but many of the funds came in through unofficial means.
Currency devaluations in other countries
Many other countries have in recent years, devalued their currencies to enable them wriggle out of harsh economic realities. Russia, Egypt, South Africa, Uganda, Brazil and Kenya have all devalued their currencies. But while the exercise has been rewarding to some economies, it has failed woefully in others. Chief Economist at RenCap, Charles Robertson urged Nigeria to emulate the strategy adopted by Egypt in devaluing its Pound Sterling. He said that Russia devalued its Ruble in 2014; Argentina devalued Peso in 2015. There have also been currency depreciations in South Africa and Brazil while Egypt devalued its Pounds Sterling.
“In an ideal world, Nigeria will let its currency float too in 2017 – but that is not a story for today. No investor will put money into Nigeria, unless it copies the currency reform story that Egypt and Russia have both done. South Africa raised a few questions because the South African Rand (ZAR) rally this year helped its market so much. A reasonably decent value ZAR remains the positive for the country as we head into 2017 but the sovereign downgrade is one of the negatives,” Robertson said. He said although ZAR remains attractive, but the country’s GDP, rating, credit growth are not interesting.
The chief economist said the Central Bank of Egypt (CBE) shifted in November the currency rate to Egypt Pound (EGP) 13 to dollar which is a 20 per cent discount to fair value based on long-term average Real Effective Exchange Rate (REER) model.
He said the CBE is allowing 10 per cent bands on either side of that central rate, then those bands will be removed, and the float will be full, and this, he wants Nigeria to emulate. “Nigeria may become a great trading centre in 2017 – assuming the currency policy changes,” he said.
Equally, Mhango, sees currency appreciation potential in Uganda, stability in Kenya and how 2017 could become West Africa’s year, with at least 10 per cent appreciation of the naira if the currency is allowed to freely float.
Speaking on the theme: “African currencies: Getting cheaper”, she said the naira is now undervalued but will become cheaper in the short-term. She said that a crisis of confidence in the naira implies it may get cheaper. The Kenya Shilling (KES) is not cheap, on our estimates, but stronger buffers are likely to keep it stable in the short term.
“We expect the interbank forex rate to fall further, despite the naira being undervalued, partly due to low market confidence. The widening gap between the parallel forex rate of N480 to dollar and the interbank rate of N305.5 to dollar implies the market thinks the interbank rate should be lower. However, we do not think the ‘market-clearing rate’ is as low as the parallel rate suggests, because that market is illiquid,” she said.
On Kenya, she named three reasons why the country’s central bank is in a stronger position to keep the shilling stable than it was in 2015.
Mhango said: “First, forex reserves have improved to 5.2 months of import cover, from 4.2 months a year ago. Second, Kenya has access to a $1.5 billion International Monetary Fund (IMF) ‘insurance facility’, which it can draw upon if the economy experiences an exogenous shock that undermines the balance of payments. Third, Kenya’s positive real interest rates, even following this year’s 1.5 percentage point cut in the policy rate, to 10 per cent, are likely to be supportive of the shilling in the short term. We see scope for another 50-basis point cut before 2016 year-end.
“We forecast forex of KES 103 to dollar and KES 106 to dollar at 2016 year-end and 2017 year-end, respectively. The downside risks to our forecasts include unfavourable weather, unstable elections and a sharp oil price increase.”
Stakeholders proffer solution
Chioke believes the incorporation of a long-term diversified strategy in fiscal policy is required to cushion shocks in various segments of the economy.
To him, the persistent pressure on the naira could have been minimised if a counter fiscal policy had been developed, as the CBN cannot continue to defend the naira with foreign reserves. “To reduce this pressure, an inward looking policy (tax incentives, infrastructure development and production subsidy) should be emphasised to reduce the dependence on imported goods”, he said.
He explained that asides from oil receipts, the development of the agricultural sector will in the short-term reduce the forex burden of food imports and on the long run, enhance foreign receipts if its comparative advantage in the sector is efficiently deployed.
Head Currencies Market at Ecobank Nigeria, Olakunle Ezun, said the solution was not in policy change but in boosting dollar liquidity.
Ezun said: “There is a limit to how far a policy can support naira. Demand for dollar is huge because the economy is import dependent. A lot of industries still depend on importation of raw materials and finished goods making our import bills to go up. The CBN disburses about $600 million monthly to manufacturers and other real sector operators, representing about 25 per cent of the monthly demand of $4.8 billion.”
He said the CBN does not have the capacity to support the naira. “The only solution is for crude oil prices to rise. But that is beyond us. We are also contending with the Niger Delta disruption of oil production, which has also adversely affected dollar inflows,” he said.
CBN Director, Research and Development, Uwatt Uwatt, said that growing the non-oil sector of the economy is key in restoring the value of the local currency.
The CBN director said the drop in prices of crude oil in international markets has rekindled the need to revamp the non-oil sector.
“Declines in global crude oil prices have triggered major headwinds for the economy. Continued dependence on oil poses a big threat to economic stability. The nation is now trying to retrace its steps from over dependence on oil for major part of its revenues,” he said.
Uwatt said that between 2011 and 2015, the contributions of oil sector to GDP stood at 12 per cent and that the federal allocations reports for August this year showed that non-oil sector contributes 57.5 per cent to federally-collected revenues. He said that government has adopted protectionism policies, trade libralisation, export promotion policy and privatization to drive non-oil export.
Gwadabe said the country has not been able to build strong buffers, so that when crisis of this nature occurs, as seen in other countries, the economy would be protected.
He said: “The United Arab Emirates has over $400 billion in their reserves and that is a very big buffer for them as it protects their local currency at any given time and that is what I would want to see in Nigeria. Don’t forget that without the buffers, there is no way one can defend the local currency.”
It is the absence of such buffers at a period of global crude oil crash that has remained the bane of the naira.
Naira’s fall and the future
The misfortune of the naira began early November 2008, when it first crashed from N118 to N120 to the dollar. By the middle of that month, it fell to about N134 to the dollar. The free fall continued in early 2009. By the end of the first week of January 2009, the naira had fallen to about N144 to the dollar and the inter-bank forex market.
The situation worsened at the parallel market as the currency exchanged for N147 to the dollar. It later fell to N160 to the dollar, causing greater shocks for international trade. The local currency had weakened to N215 to the dollar in early January and continued to depreciate till date.
In its assessment of the Nigerian situation, Goldman Sachs described January 2006 – December 2008 as a period dominated by a stable trading and appreciation of the naira. It, however, warned that the past performance does not guarantee future returns.
Despite promises by successive CBN governors to bring sanity to the troubled currency, its misfortunes continue to multiply. From Prof. Charles Soludo, Sanusi to Emefiele, the naira has endured broken promises.
And now, with 10 exchange rates to contend with, and little confidence that crude oil prices will recover to 2014 levels in the nearest future, naira’s woe is just beginning, and not even the flexible forex policy can fix it.