Nigeria’s forex devaluation timeline
Since the first quarter of the year, Nigeria has faced an exchange rate crisis triggered by a drop in oil prices. It started after two of the world’s largest oil producers, Saudi Arabia and Russia disagreed on how to proceed as regards oil supply cuts, triggering a price war that pushed oil prices to crash to as low as under zero dollars.
In March, the world fully became aware of the existential threat that was the Covid-19 pandemic that has since affected millions of people globally and killed hundreds of thousands. These twin events have had a telling effect on Nigeria’s economy. As an economy highly dependent on crude, the oil price war meant Nigeria earned less from crude oil sales cascading to an even larger problem, Forex.
With oil prices down, pressure on Nigeria’s exchange rate grew leading to speculations of a devaluation to reflect the true value of the naira. Thus began one of the most significant deluges of policy pronouncements and flip flops on the management of Nigeria’s foreign currency.
In this tracker, fabpulse collates a timeline of all the forex-related policy decisions and denials that have occurred since March 2020. This timeline is updated regularly as new information becomes available.
August 27, 2020
Nigeria’s Central Bank issued a circular authorizing and instructing dealers to sell forex to end users at N386/$1.
In a circular titled, “Weekly Exchange Rate for Disbursement of Proceeds of International Money Transfer Service Operations” the Apex bank detailed the applicable exchange rate of proceeds of IMTOs for the period, August 31, 2020.
August 26, 2020
The Central Bank of Nigeria (CBN) to go tough on exporters who are guilty of forex non-repatriation. This is part of the CBN’s ongoing efforts to resolve the prevalent forex crisis in the country by increasing forex liquidity.
To this end, the CBN directed banks to submit the names, addresses, and Bank Verification Numbers (BVNs) of all the exporters who have failed to repatriate their export proceeds. Necessary ‘action’ would be taken against such defaulters, the CBN said in a statement.
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The statement further noted that the Central Bank Governor, Godwin Emefiele, gave the directive on August 25, 2020, while virtually attending a Bankers’ Committee meeting.
READ: CBN says 22 banks to restructure over 35,000 loans due to COVID-19
August 24, 2020
Central Bank of Nigeria (CBN) issued a circular removing buying agents/companies or any third parties from accessing its SMIS forex window through FORM M forex purchases.
In a circular dated August 24, 2020, the apex banks instructed that “Authorized Dealers are herby directed to desist from the opening of Form M whose payment is routed through a buying company/agent or any other third parties” effectively eliminating third parties or middlemen from transacting in forex deals in its official SMIS window.”
August 6th, 2020
Information on the website of the CBN revealed the apex bank had adjusted the official exchange rate to N380/$1 from N360.1/$1. The adjustment occurred on Thursday, August 6th, 2020.
This suggests the CBN may have unified the exchange rate in line with the promise made by Godwin Emefiele, the Governor of the Central Bank of Nigeria.
July 13, 2020
CBN restricted access for the importation of maize through the official CBN forex window.
It hinged its decision on the need ‘to increase local production, stimulate a rapid economic recovery, safeguard rural livelihoods and increase jobs which were lost as a result of the ongoing COVID-19 pandemic.’
July 3, 2020
CBN reportedly instructed bidders at its Secondary Market Intervention Sales (SMIS) to increase their bidding price to N380/$1 floor. The SMIS is the market where importers bid for forex using Letters of Credit and Form M.
The apex bank allegedly informed banks that they will only accept bids from N380/$1 and above and no longer N360/$1 meaning those who bid lower will not get any forex allocation.
Transaction success in this market is based on bids with those who bid higher than the floor as they are often in an advantageous position to secure forex.
June 23, 2020
The Governor of the Central Bank, Godwin Emefiele, confirmed that the CBN will continue to pursue unification around its Nafex rate. The NAFEX rate is the forex window where Investors and Exporters transact dollars on market-determined prices. The CBN Governor said this at an Investors Conference with the Federal Government of Nigeria by CitiBank.
May 21, 2020
The Central Bank of Nigeria (CBN) Governor, Godwin Emefiele, warned businesses and individuals against patronizing the parallel market, popularly called the black market.
He warned them to stop using black markets for foreign currency exchange, following the liquidity crisis triggered by low oil prices and a shortage of dollars.
READ: Exchange rate depreciates at NAFEX window as forex liquidity drops further by 57%
May 19, 2020
The Central Bank of Nigeria (CBN), in its quest to stabilize Naira injected funds to the currency market through the Wholesale Secondary Market Interventions.
The auction was earlier put on hold by the CBN due to the COVID-19 pandemic and dwindling foreign exchange reserves standing at less than $34 billion.
May 18, 2020
The Central Bank of Nigeria (CBN) tasked industrial conglomerates operating in the country to support efforts of the government to grow the nation’s economy and return it to its green days.
The CBN boss warned that the apex bank would not support the importation of items that could be produced in Nigeria. According to him, the bank could not spend its foreign exchange reserves on what would not boost the economy and generate jobs for Nigerians.
May 10, 2020
The Central Bank of Nigeria (CBN) has assured foreign investors that repatriating their funds from the country is secured despite forex related revenue shortages due to the drop from the sale of crude oil globally.
In the statement, CBN Governor, Godwin Emefiele explained that the apex bank had put in place policies to ensure an orderly exit for those that might be interested in doing so and also urged investors to be patient as such repatriations are processed, owing to the Bank’s policy of orderly exit of investments.
April 29, 2020
The Central Bank of Nigeria (CBN) resumed sales of dollars to SMEs that need foreign exchange for essential imports, as well as Nigerian students in foreign schools who need to pay their school fees.
According to a brief statement that was signed by the CBN’s Director of Corporate Communications, Isaac Okoroafor, the apex bank provides over $100 million per week for the two categories of dollar consumers mentioned above.
April 27, 2020
CBN adjusted the exchange rate for import duty payment from N326/$ to N361/$.
With this development, the Nigeria Customs Service (NCS) was directed to effect an increase in duty payable on cargoes imported through the ports.
March 27, 2020
Central Bank of Nigeria (CBN), in a note issued to Bureau De Change operators (BDCs) in the country, suspended the sales of foreign currency for two weeks.
However, this does not affect dollar transactions in the Investors & Exporters (I&E) window. Thus, portfolio investors, as well as businesses that still require FX for foreign transactions settlement, can access the I&E window.
March 24, 2020
The CBN announced it was collaborating with the Nigerian Financial Intelligence Unit (NFIU) to uncover speculation and would charge such dealers for economic sabotage. The bank added that market fundamentals did not support devaluation.
March 22, 2020
The Central Bank of Nigeria (CBN) halted the sale of dollars to the Nigerian National Petroleum Commission (NNPC) by oil companies, including International Oil Companies (IOCs) that operate within the shores of the country.
The apex bank explained that the move to stop the sale of dollars is in line with its commitment to improving foreign exchange supply to the economy as the impact of the novel Coronavirus (COVID-19) pandemic bites harder on the economy.
March 20, 2020
Central Bank of Nigeria devalued its official exchange rate from N307/$1 to N360/$1. The apex bank reflected this change on its website signaling a confirmation.
March 10, 2020
The Central Bank of Nigeria (CBN) fined Bureau De Change (BDC) operators over various infractions in the foreign exchange market.
Over 100 BDC operators were fined N5 million each for various infractions in the foreign exchange market.
March 12, 2020
The Central Bank of Nigeria (CBN) debunked speculations making the rounds and suggesting that the naira is finally about to be devalued.
According to a statement, the apex bank blamed “unscrupulous players in the foreign exchange market” for spreading the rumour.