Money Market

Naira crashes at the official market on plans to unify the exchange rates

Naira crashes at the official market on plans to unify the exchange rates.  The uncertainty in the foreign exchange market appears to go on unabated as the naira
Naira crashes at the official market on plans to unify the exchange rates.

The uncertainty in the foreign exchange market appears to go on unabated as the naira opened for trade on the official market 6.2% lower against the dollar on Wednesday.

The local currency exchanged for N385 to a dollar as against the N361 to a dollar that it exchanged the previous day, on the indications that the government would move to conserve the dwindling external reserves and unify the exchange rates.

According to a report from Reuters, the Minister for Finance, Zainab Ahmed, said that the Federal Government would seek to unify the exchange rates so as to generate more revenue from foreign exchange earnings and manage the rate in a sustainable manner.

The Minister said that government would also direct oil firms to sell dollars to the central bank as against the earlier practice of selling to the Nigerian National Petroleum Corporation (NNPC) while also adding that it would follow through with its deregulation policy of the downstream sector of the oil industry in order to safeguard oil revenues.

The document from the Finance Ministry suggests that these policies will be implemented over a 12-month period.

This new development will align with the views of many analysts and the International Monetary Fund (IMF), who have been advocating for a unified exchange rate system so as to eliminate distortions and corruption in the system.

The exchange rates include the official rates, the rates for the investor and exporter window and the rate for Bureau De Change Operators (BDCs)

Nigeria has been operating a multiple exchange rate regime which was used by CBN to manage the pressure on the naira. But the foreign exchange market has been under pressure with low dollar inflow due to the crash of oil prices globally which is triggered by the coronavirus pandemic.

The currency has been hitting new lows at the parallel market and over-the-counter spot markets since March 2020, following the rates adjustment by CBN.


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