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Nigerian Currency Plunges to New Low of 570 — 10% of Value Lost in Under 30 Days

Sep 18, 2021 15:00

Nigerian Currency Plunges to New Low of 570 — 10% of Value Lost in Under 30 Days
Nigerian Currency Plunges to New Low of 570 — 10% of Value Lost in Under 30 Days
 
 
The Nigerian currency, the naira, plunged to a new all-time low of N570 for every dollar on September 16, 2021. This new exchange rate means since August 17, the naira has now lost about a tenth of its value on the foreign currency black market.
 
Naira Overvalued
In spite of this plunge, which has been attributed to the biting shortage of foreign exchange, authorities insist the naira’s real exchange is unchanged at N411 for every dollar. This means forex buyers that source this commodity on the parallel market are now paying a premium of over N150.
 
Alternatively, the new parallel market exchange rate of N570 may suggest that the Central Bank of Nigeria (CBN) is now overvaluing the naira by 40%. In fact, this latter point appears to be corroborated by comments made by the CBN governor, Godwin Emefiele. In his comments to a group of investors in late June 2021, Emefiele suggested at the time that the naira was overvalued by 10%. He also hinted that devaluation of the naira was in the cards.
 
However, since then, the naira’s official exchange rate has remained unchanged while the currency’s rate of depreciation on the parallel market appears to have accelerated, particularly in the past few weeks. Meanwhile, the central bank’s unwillingness to devalue the naira may have created more problems for the CBN — the hoarding of foreign exchange.