The naira […] lost about 76.17 per cent of its value since June 2014 when the suspended Governor of the Central Bank of Nigeria, Godwin Emefiele, took office, according to findings by Sunday PUNCH.
It was observed that the naira official rate compared to the US dollar had fallen from N164 to N462.4 (or 64.53 per cent) since June 2014.
Within the same timeframe, the naira has weakened from $1/N183 to $1/N768 in the parallel market.
This also indicates the currency has suffered 76.17 per cent depreciation since 2014 under Emefiele.
Although he was appointed by former President Goodluck Jonathan in February 2014 after the suspension of Lamido Sanusi, his predecessor, Emefiele officially assumed duty in June of that year.
He was re-appointed for a second term of five years in 2022 by the immediate past President, Muhammadu Buhari.
Sunday PUNCH further observed that the naira lost significant value under Emefiele than most CBN governors since 1999.
In July last year, the Senate resolved to summon the CBN governor to educate and inform senators in a closed-session on the reasons for the rapid depreciation in the value of the naira against foreign currencies.
It also mandated its Committee on Banking, Insurance and Other Financial Institutions to assess the impact of the CBN intervention funds meant to support critical sectors of the economy
The resolutions were reached by lawmakers after the upper chamber considered a motion sponsored by Senator Olubunmi Adetunmbi.
A breakdown of how the currency moved under each CBN governor showed that under Joseph Sanusi, the naira-to-dollar exchange rate moved from N99 to N132. Joseph Sanusi spent five years at the helm of the apex bank between 1999 and 2004.
Under Chukwuma Soludo (2004-2009), the dollar exchange rate moved from N133 to N147, while under Lamido Sanusi (June 2009-February 2014), the dollar exchange rate moved from N148 to N157.
Under Emefiele, the value of the naira to the dollar weakened significantly despite efforts to ensure stability by the CBN.
In a bid to manage the value of the naira, the CBN introduced a number of policies, such as stopping forex supply to importers of 41 items that could be produced locally, offering N5 for every $1 remitted to Nigeria through Internal Money Transfer Organisations, and banning the supply of forex to Bureaux De Change, among others.
Specifically, in March 2021, the bank introduced the ‘Naira 4 Dollar Scheme’, intended to boost the inflow of Diaspora remittances into the country. This programme works by paying Diaspora remittance recipients an incentive of N5 for every $1 received through a licensed IMT operator.
In May 2021, the CBN adopted the NAFEX rate as the benchmark rate. This initiative simply meant that rather than having multiple official rates (e.g. CBN rate at N379/$ vs. IEFX rate of N410/$ at the time), the bank simply decided to reduce the number of official rates.
In July 2021, the CBN announced the discontinuation of foreign exchange sales to BDC operators. Emefiele alleged that some BDCs’ actions contravened the agreement with the apex bank by seeking to maximise profits, which he deemed excessive.
In February 2022, the CBN extended the naira for dollar scheme from the IMTOs to the IEFX window.
Specifically, the CBN released instructions that outline that it would facilitate the payment of N65 for every US dollar repatriated and sold at the Investors and Exporters’ Window.
However, these policies have not been able to maintain naira stability.
The World Bank disagreed with the CBN on how it tried to achieve price stabilisation of the naira, adding that the currency should be allowed to respond to real pressures and not be bottled up by the apex bank.
It added that the country’s exchange rate strategy was discouraging investors and increasing inflation.
A Global Finance Report also said that the CBN had failed to curb rising inflation and stop the naira from sliding against the US dollar.
The World Bank in its Africa’s Pulse report for April 2023 noted that the naira lost 10.2 per cent of its value in 2022.
This came as rising food and fuel prices spiked high inflation in the country in 2022.
Economists give opinions
A professor of Economics at the Olabisi Onabanjo University, Ago-Iwoye, Ogun State, Prof Sheriffdeen Tella, said there were certain political and economic issues triggering naira devaluation.
On the economic issue, he said the increase in imports over exports and illicit capital flow were major reasons for naira depreciation.
He said, “The devaluation is caused by both political and economic issues. The economic issue is that we continue to import goods and we are not exporting much beyond oil. Also, the non-oil sector is not doing very well, and we are still importing more.
“There is also the issue of illicit capital flow. That is, people taking foreign currencies without caution. The coronavirus pandemic has also affected output.”
On the political issue, he explained that the CBN had been intentionally devaluing the naira in order to increase the funds given to state governments.
Tella added, “On political grounds, the CBN, probably with collusion from the Ministry of Finance, has been devaluing the value of the naira officially to increase the amount of naira given to state governments.
“The official devaluation of the naira has taken place twice, and that is a political thing. They are doing it to satisfy fiscal expenditures.”
He urged the government to address these issues to achieve naira appreciation.
A professor of Economics and Public Policy at the University of Uyo and Chairman, Foundation for Economic Research and Training, Prof. Akpan Ekpo, condemned the intentional devaluation of the naira by the CBN.
“When you devalue, you are hoping that the goods you export will be cheaper; you can export more and earn more revenue. However, our major export is crude petroleum, and we don’t control the price or output. So, we don’t get anything from the government’s outright devaluation,” he said.
Ekpo urged the government to boost production and ensure that the country had a strong and productive economy.
He stated, “The only way we can stop the devaluation of currency is production. We need to produce more goods and services, and export them to earn foreign exchange. That is our basic problem in Nigeria; we consume what we don’t produce.
“The government needs to build an economy that is strong and doesn’t rely on one commodity.”
A former President of the World Bank Group, David Malpass, recently warned that Nigeria’s parallel exchange rate was harmful as it would worsen future debt service payments and increase the risk of debt distress.
Malpass said this in a blog post titled, ‘Parallel Exchange Rates: The World Bank’s Approach to Helping People in Developing Countries’, published on the bank’s website.
According to Malpass, about 24 emerging and developing economies, including Nigeria, have an active parallel currency market.
“In at least 14 of them, the exchange rate premium—the difference between the official and the parallel rate— is a material problem, exceeding 10 per cent,” he added.
In the blog post, it was disclosed that Nigeria had an exchange rate premium of 61.7 per cent as of March 2023.
The World Bank chief noted that parallel exchange rates were expensive and could drive corruption.
