While the USDNGN spot exchange rate is quoted and exchanged in the same day, the USDNGN forward rate is quoted today but for delivery and payment on a specific future date. Quick History. The main questions then: “what exchange rate would emerge from the float?” and “would there be an inflationary burst?”. What purpose then would be served by an exchange rate adjustment?”. While the Central Bank had pledged to move Parallel markets for foreign exchange (typically illegal) were rampant in Africa and Latin America during the mid 1980s. Most of my then colleagues at the World Bank and IMF believed an equilibrium exchange rate of close to 1.5 naira to the dollar would emerge from the auction because Nigeria’s oil dollars (the bulk of foreign exchange earnings) were allocated at the official rate.   Any inflationary impacts would come from the fiscal consequences of the float. Agriculture, once a mainstay of the economy and of non-oil exports, collapsed because of competition from cheap imports and neglect. This argument is incomplete and ignores many important issues: the credibility of macroeconomic policy; subsidies for the rich hidden in the overvalued exchange rate; and the constraints placed on pricing and production  by new restrictions pushed by policy makers hoping to regulate their way out of the current currency crisis. Even if $1 becomes N200, 000, if supply exceeds demand, the value will fall.” Returning to a market-determined exchange rate via a float would probably lead to a new exchange rate close to that in the parallel market. 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Directly after the peg was abandoned on 20 June, the currency lost over 40% of its value against the USD and fell to 282 NGN per USD. After decades long of word counts and verbal exchanges on Naira devaluation and “oil subsidy removal”, yours sincerely is truly contestation weary on the twin policy issues. Download historical data for 20 million indicators using your browser. Do NOT follow this link or you will be banned from the site. Looking forward, … And with further devaluation of naira the scarcity of dollars and pounds will greatly magnify. In 1986, the official rate of Naira to Dollar was about N1.5. Trading Economics members can view, download and compare data from nearly 200 countries, including more than 20 million economic indicators, exchange rates, government bond yields, stock indexes and commodity prices. This was seen as a key step in reestablishing macroeconomic policy credibility which has been in tatters since Argentina’s sovereign default of 2001. Nigerian Naira - data, forecasts, historical chart - was last updated on December of 2020. The minimum depreciation in any decade is 34%. The country is an oil exporter and embroiled in conflict. Despite efforts of the Government, it was not possible to hold these prices. What is Naira Devaluation? At the same time, the parallel exchange rate provided N5 for one dollar. The United States (US) adopted Saturday a “new official” map of Morocco that includes the disputed territory... NdaniTV has released the official trailer for its brand new series, GAME ON. The Trading Economics Application Programming Interface (API) provides direct access to our data. Brethren! Any reprieve Nigerian agriculture might have received after oil prices collapsed in the early 1980s never materialized because of bad exchange rate policy during the first Buhari regime. How Technology is Helping People Working from Home? Direct access to our calendar releases and historical data. The naira was introduced on 1 January 1973, replacing the Nigerian pound at a rate of 2 naira = 1 pound. Over the ten-year period from 1973-1983, the Nigerian government directed very little public spending towards agricultural research and development or enhancing rural infrastructure, unlike in similarly oil rich countries such as Indonesia which spent heavily to improve non-oil sources of revenue. The day before, it bled. By April 2015, when CBN reintroduced foreign exchange rationing with restrictions on credit cards, the dollar oil price had fallen some 40 percent from its peak in June 2014. All but four of the survey participants said the naira is more than 10% overvalued against the dollar. 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These parallel markets have resurfaced in recent years, usually in countries with serious problems in economic governance. Technical Feedback: whatsapp 08023469027 Currencies Nigeria’s forex devaluation timeline – 2020. As a result of large fiscal and current account deficits during the boom period of 1973 to 1980, Nigeria’s foreign debt had grown to $19 billion by 1985. The Finance Director of Nigerian Breweries Plc, Rob Kleinjan, has revealed that the increase in the brewer’s costs of goods was due to the devaluation in naira and FX scarcity, which led to the increase in the cost of inputs such as sorghum and sugar, as they are not fully produced locally. The Naira was resilient and enduring, … COVID-19: N149bn to 317 beneficiaries The naira has been continually devalued since its inception in 1973, and inflation remains above 10% as of 2019. However, it is more of a result of the American government taking control of its currency exchange rate, which is against the rules stipulated by Bretten … Naira devaluation risky for foreign currency loans, says report – The devaluation of the naira against global currencies will impact negatively on foreign currency loans and weaken capital base for the lenders, banking sector report has shown. The official rate was irrelevant from the perspective of the average consumer. We hate to be the bearers of bad news (or to be super dramatic by quoting Shakespeare’s Macbeth) but something potentially wicked this way comes.The thing in question is called Naira Devaluation and from the looks of it, it’s going to kick everyone’s asses. It is apparent that the parallel exchange rate is driven by the oil price, since oil accounts for 70 to 80 percent of government revenues and the lion’s share of Nigeria’s exports. In other words, the market had already corrected itself without action from the policy makers. An imported good costing one dollar was more likely to sell for 5 naira (the parallel rate in September 1986) than 1.5 naira (the official rate). According to the governor, the Naira had already been devalued by about 28 per cent this year, just like many other currencies of the world. XE’s free live currency conversion chart for Nigerian Naira to US Dollar allows you to pair exchange rate history for up to 10 years. Kept at a steady rate of $360 by supporting the demand with Naira injection and ... Andrei Tapalaga ️ in History of Yesterday. The devaluation of the naira against global currencies will impact negatively on foreign currency loans and weaken capital base for the lenders, banking sector report has … This was perhaps the death blow to Nigerian agriculture and a big contributor to the growing concentration of oil in total exports. The USDNGN spot exchange rate specifies how much one currency, the USD, is currently worth in terms of the other, the NGN. However, by 1985, the economy was in a bad state with Nigeria’s foreign creditors insisting on an IMF program for rescheduling a relatively small sum of $2 billion. The naira has been weakening against the U.S. dollar since June when the Central Bank scrapped the currency peg that had kept it at an artificially-high value of around 198 NGN per USD for over a year. The adverse effects of devaluation are humongous and insidious: Apart from massive unemployment and hyperinflation, the prices of food and essential commodities will be too expensive; beyond the reach of the suffering masses in a nation where 85 percent of the population survived with … This Christmas season I had intended to engage in a critical investigation of religion given the powerful theological si... By Douglas Anele In spite of efforts to clean up the electoral process, rigging, violence and electoral manipulation of... By Denrele Animasaun ‘The writer cannot be a mere storyteller; he cannot be a mere teacher; he cannot merely x-ray socie... Naira devaluation or doom: Is Nigeria’s economic history repeating itself? 4. This is not the first time Nigeria’s currency has been devalued because of the drop in oil price. The medium term outlook for oil prices remains bleak. I vividly remember my 1985 conversation with an importer: “Would not there be an inflationary burst if CBN were to float the naira?” I naively asked. With the parallel rate at 360 naira per dollar, this hidden tax on non-oil exporters currently stands at 45 percent. Naira Devaluation History The history of the naira shows that it has always depreciated since its inception. In January 2009, it virtually shut down the interbank foreign exchange market, fuelling a significant parallel market premium. Nigeria’s latest devaluation of the official naira rate -- one of the West African nation’s multiple exchange rates -- has left traders perplexed. In September 1986, the parallel exchange rate in Nigeria was 5 naira per dollar, implying a premium of 230 percent over the official exchange rate of 1.5 naira per dollar. Effect of Devaluation. On the 20th of February 2016, Nigeria’s President Buhari hardened his stance against devaluing the Nigerian Naira because he believes devaluation will not help the country “as it had few exports apart from oil and depended on imports whose cost would rise with such a move.” This view is shared by Governor Emefiele of the Central Bank of Nigeria (CBN), who noted on 17th November 2015 “Our major export commodity which accounts for more than 80% of our income is crude oil…and what is supposed to be the non oil export, we are not producing effectively.” CBN governor, Emefiele, also warned that that naira devaluation would lead to hyperinflation. For Nigeria the impact would be a positive lowering of the fiscal deficit and therefore, inflationary pressure. The present situation is eerily similar to that which prevailed 30 years ago. The quotes above from Governor Emefiele and a paper on Nigerian economic policy written in 1987 indicate that history has come full circle once again. This also made Nigeria the last former British colony to abandon the £sdcurrency system in favour of the decimal currency system. Despite the systematic Naira devaluation in the last 40years, Nigeria and Nigerians are yet to experience the goodies currency depreciation advocates promised. It decimated non-oil exports and inexorably transformed the Nigerian economy over time into the “mono-economy” referred to by current Central Bank Governor Mr. Emefiele. The Nigerian Naira is expected to trade at 380.50 by the end of this quarter, according to Trading Economics global macro models and analysts expectations. The items range from toothpicks to private airplanes and jets. This led to a series of steps to lower the fiscal deficit and eventually CBN was persuaded that it would be a good idea to unify the official and parallel exchange rates. President Buhari’s intransigence and Mr. Emefiele’s hyperinflationary fears are unfounded because domestic goods pricing already reflects the parallel rate. Devaluation of Naira on Nigerian Economy NGN to USD currency chart. Third, if the central bank were to unify the official and parallel rates by floating the Naira, this would lead to a large depreciation as the official rate merged with the equilibrium parallel rate. On December 17, 2015, Argentina’s peso depreciated sharply, with the official exchange rate rising to 13.95 pesos per dollar from 9.8 pesos per dollar, much closer to the parallel rate of 14.5, after a new administration floated the currency. “You don’t understand,” he chided me. This meant a huge hidden tax on agriculture, since procurement prices were set with reference to the official exchange rate and little attention paid to international prices. In addition, as noted above, the premium was a ruinous hidden tax on the once-flourishing agricultural sector. Argentina and South Sudan are examples. The powers at the time said: “Oil is dollar-denominated and virtually our only export. Instead of letting the naira depreciate in line with falling oil prices, CBN introduced rationing via an import license system. kalu Aja, a financial analyst also said the country needs to build- up supply for dollar in order to end the naira devaluation streak. Yet both have taken steps to eliminate parallel foreign exchange markets through appropriate, market-based exchange rate policy. He made the pledge while launching PAN's new products on Sunday during the grand finale of the 2020 Keffi Polo Tournamen... By Olayinka Ajayi Bishop of the Living Faith Church, LFC, worldwide David Oyedepo, on Saturday, disclosed at the Shiloh... By Peter Egwuatu The stock market Monday recorded a new high after five months of low activity as the benchmark index, N... By Rasheed Sobowale Some Nigerians have disputed the Federal Government (FG’s) claim that it has reduced the cost... By Owei Lakemfa ETHIOPIA is today, bleeding. However, there would be no inflationary burst because domestic goods prices already reflect the parallel rate. Nigeria Trade Balance Swings to Gap in September, Nigeria Private Sector Growth Slows to 4-Month Low, Nigeria Economy Slips into Recession in Q3, Nigeria Services Sector Shrinks for 8th Month, Nigeria Factory Activity Stabilizes in November, Nigeria Inflation Rate Quickens for 14th Month, Fitch Revises Nigeria Credit Outlook to Negative, Oil Prices Slide on Friday, Book Weekly Gain, US Stocks Book Weekly Loss, S&P Links Third Fall, Senegal November Inflation Rate at 5-Month Low, Spanish Shares End Lower, Fall 3.1% on the Week. By the mid 1980s, oil prices had collapsed from a supply glut following the oil price hikes of 1973-74 and 1979-80. All CBN will be doing is to slash my profit!”. In November 2014, the CBN similarly devalued the naira from N155 per dollar to N168/$1 and further to N199/$1 following the falling oil prices and subsequent dwindling international reserves, . Aliko Dangote, president of the Dangote Group, says the devaluation of the naira will not affect the food fortification targets set by leaders in the Nigerian food industry. Hence, an analyst once said, only a fool keeps all his wealth in naira. Nigeria must stop selling its valuable oil dollars cheap. Oil prices fell another 48 percent between April 2015 and January 2016. The investment climate in manufacturing and agriculture will improve dramatically with the elimination of the hidden tax from the parallel market premium. These were his words: “The Bible says where there is no vision, people perish. This fact had three important implications: First, the parallel exchange rate was the equilibrium exchange rate. In contrast, Nigeria has taken steps to ration foreign exchange instead of letting the market determine the exchange rate after oil prices began their most recent fall. READ our Privacy-policy and cookie policy. In September 1986, the parallel exchange rate in Nigeria was 5 naira per dollar, implying a premium of 230 percent over the official exchange rate of 1.5 naira per dollar. Two respondents said it was at least 20% too … Speculations started March 12 that the naira might be devalued. This meant that private individuals with access to government could easily enrich themselves at the expense of the Nigerian people. DEVALUATION OF NAIRA PROPHECY: On February 19th 2017, Prophet TB Joshua gave a prophecy regarding the devaluation of the Nigerian Naira currency. Nevertheless, CBN resisted devaluing the naira, arguing ironically that no useful purpose would be served because oil was virtually the only export! What is Naira Devaluation? According to the famous quote from the philosopher George Santayana, “those who ignore history are doomed to repeat it.” Thirty years ago in 1986, Nigeria’s policy makers made the exact same argument against devaluing the naira under extreme pressure from a similar oil price collapse. The chart below shows the value of the naira on the official and parallel markets against the decline in global oil prices. To a new exchange rate provided N5 for one dollar and neglect 1995-2020 data | 2021-2022 |! Action from the fiscal consequences of the survey participants said the naira by as much as 15 percent with introduction! At 360 to the naira devaluation history concentration of oil in total exports, Nigeria Nigerians. S Central Bank of Nigeria may have devalued the naira might be devalued had from. In favour of the float prices already reflect the parallel rate since inception... In manufacturing and agriculture will improve dramatically with the elimination of the economy of... 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