The value of the Naira fell by 51.95 per cent between December 2015 and April 2021 from 196.99 to 410 despite the various foreign exchange policies introduced by the Central Bank of Nigeria to strengthen the currency.
The CBN had pegged the value of the naira at the inter-bank forex market at N196.99 as of December 2015.
In a move to achieve exchange rate stability and preserve the country’s forex reserves, the CBN in 2015 reviewed downwards the spending limit on the usage of naira-denominated debit cards for transactions abroad.
Also in June 2015, the CBN announced that it was stopping the supply of forex to 41 items that could be easily produced in Nigeria, a development that brought about the forex exclusion policy.
However, after about a year of implementation, the value of naira plummeted at both the official and parallel markets, falling from 197/$ to 232/$ and 218/$ to 351/$ in both markets respectively.
In 2017, the exchange rate at the official window fell to the N300/$1 threshold, ranging between N305 to N306 to a dollar.
This was despite the introduction by the CBN of a new window for investors, exporters and end-users aimed at driving liquidity in the forex market.
From January 2020 to April 2021, the naira continued in a downward trend at both markets, falling from 307/$1 to 381/$1 in the official window and 361/$1 to 481/$1 at the parallel market.
The decline continued despite the CBN’s introduction of an incentive of N5 for every $1 of fund remitted to Nigeria through International Money Transfer Organisations, as part of its reforms to boost the inflow of foreign currency in the country.
Responding to a question on why the Nigerian forex continued to depreciate despite the policies, an investment strategist at Afrinvest, Omosuyi Temitope, said, “The reason the policies are failing is because they are makeshift policies; they can’t address the fundamental factors that have kept the naira under water.
“The major factor that needs to be addressed is the external trade condition – that is the current account; so long as the Nigerian current account continues to suffer major setback, particularly when we have huge imports over exports, then naira will remain likely subdued.”
