The Central Bank of Nigeria has reaffirmed its commitment to resolving the foreign exchange crisis currently rocking Nigeria.
The CBN disclosed this in response to Lawmakers’ summons about the falling Naira.
At the start of July 2022, the exchange at the parallel market was trading at N605/$. Compared to the current value of N720/$, the Naira has declined by a whopping 19% in one month.
In response to the Lawmakers summon of the Governor of the Central Bank of Nigeria, Godwin Emefiele, over the “free fall of the naira”, the bank said, “The CBN remained committed to resolving the foreign exchange issues confronting the nation and as such has been working to manage both the demand and supply side challenges.”
The bank said demand pressure was huge from manufacturers and individuals paying school and hospital fees abroad and that it was looking at ways to earn forex in the wake of dwindling oil proceeds.
The CBN stated that Nigeria needs to look inwards and adjust its consumption patterns, as one solution to the current challenge.
- The Nigerian foreign exchange crisis was exacerbated after foreign investors fled as crude oil prices plummeted during the COVID-19 pandemic and Nigeria’s demand for funds increased. Crude oil prices have since recovered, but investors have not yet returned.
- Since the central bank stopped selling FX to Bureau De Change operators in July 2021, the dollar shortage has pushed Naira to record lows in the parallel market. This move heightened demand of dollars in Black markets where currencies determined demand and supply forces.
- Bureau De Change operators cited a lack of FX and a surge in demand for the recent uncontrolled uptrend recorded in the market. Meanwhile, some bank users have complained that they have not been able to access their funds in their domiciliary accounts due to lack of liquidity.
- Furthermore, the fall in Naira can be linked to CBN’s money supply expansion which has aggravated inflation. This is because the inflation rate of an economy is one of the quantitative factors that affect currency exchange rates.