The Central Bank of Nigeria (CBN) has made numerous attempts to defend the Naira, but the currency has massively declined by N29 in the second quarter of 2022.
This is indicative of the second-worst quarter depreciation in Nigeria, while the worst quarter was seen in Q3 2021 when the Naira fell by N44.
The Naira-US dollar exchange rate at the official Investors and Exporters (I&E) market has remained largely stable around the N420/$1 region. On the other hand, the Naira is heading toward N650/$1 on the black market, which has continued its downward trajectory.
To defend the Naira, the Central Bank has introduced a slew of regulations, from barring the sale of dollars to BDCs to the RT200 scheme, which is designed to provide an N65 rebate on export revenues.
Naira Records Second-Worst Quarter Of Depreciation In Q2 2022
Nonetheless, the CBN intervention comes at a cost in terms of Nigerian foreign reserves, which have not been growing at the expected rate despite high oil prices.
On a year-to-date basis, the reserve has lost $1.37 billion from $40.52 billion in December 2021 to $39.16 billion in June 2022. In the month of June, the external reserve gained $671.63 million, following a $1.1 billion decline in the previous month.
Dollar scarcity
The drop in forex supply contributed to the downtrend in the value of the local currency at the official market, amid the CBN’s interventions. SKYTREND NEWS took a cursory look at activities that give evidence to dollar scarcity in Nigeria.
In February 2022, Nigerian Banks sent out messages advising customers of reduced dollar limits on debit cards. Furthermore, In May 2022, IATA published information suggesting that Nigeria was owing airline operators a backlog of over $450 million.
On July 4th, the total amount of FX exchanged in the Investors and Exporters window was $47.56 million, a decrease from the previous trading session’s total of $78.86 million.
Forex turnover has averaged $67.67 million over the last three trading sessions, a significant decrease from the preceding three trading sessions’ average of $157.48 million.