CBN Explains Naira Depreciation Against US Dollar, Makes New Move To Stop the Fall

• The CBN has provided a context into the depreciation of the naira in the foreign exchange markets
• The naira's fall in the last few months has been a big surprise after a strong performance in February 2024
• The CBN has again decided to roll up its sleeves, this time focusing on the operation of Bureau de Change operators

Legit.ng journalist Dave Ibemere has over a decade of business journalism experience with in-depth knowledge of the Nigerian economy, stocks, and general market trends.

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has cited increased seasonal demand for foreign exchange as the reason for the naira's depreciation.

The CBN governor, Yemi Cardoso, disclosed this while speaking on behalf of the committee at the end of the MPC's two-day meeting held on Monday, May 20, and Tuesday, May 21, 2024.

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According to Cardoso, the CBN remains committed to ensuring the market determines the exchange rate through a willing-seller model, and what is happening reflects that.

His words:

"Members further observe the recent volatility in the foreign exchange market attributing this to seasonal demand—a reflection of the interplay between demand and supply in a functioning market system."

Naira to dollar exchange rate

The naira has been performing poorly in the official and unofficial markets, falling to as low as N1,500.

In the official market, Data from FMDQ securities showed that the naira closed Wednesday trade at N1,462.59/$1.

In the unofficial market, also known as the black market, BDC traders exchange the dollar at N1,500/$1.

CBN makes move to help naira

To stop the naira slide, the CBN has targeted Bureau de Change operators and updated its regulatory guidelines.

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Nigeria’s foreign exchange market records high dollar supply as naira recovers

The CBN demanded BDC reapply for licenses and remove the mandatory caution deposit of N200m for tier-1 BDC licence holders.

Similarly, N50m has also been waived for tier-2 licence holders. The non-refundable annual licence renewal fee has been withdrawn. Previously, tier-1 BDCs paid N5 m, while tier-2 BDCs paid N1 m for renewal.

New platforms identified as threats to naira

Earlier, Legit.ng reported that Nigerians identified the emergence of two cryptocurrency platforms as the reason for the recent fall of the naira.

The initial decline of the naira was attributed to alleged market manipulation by Binance.

Nigerians have blamed the latest depreciation on new crypto exchange platforms, namely BYBIT and BITGET.

Proofreading by James Ojo Adakole, journalist and copy editor at Legit.ng.

Source: Legit.ng