The investment climate in manufacturing and agriculture will improve dramatically with the elimination of the hidden tax from the parallel market premium. Oil prices fell another 48 percent between April 2015 and January 2016. The medium term outlook for oil prices remains bleak. Direct access to our calendar releases and historical data. To my nation Nigeria - last two years, there was a vision, a prophecy for the nation, which is still going on. The official naira-dollar exchange rate had depreciated by 21 percent over this period, to 197 naira per dollar from 162.8 naira per dollar. Directly after the peg was abandoned on 20 June, the currency lost over 40% of its value against the USD and fell to 282 NGN per USD. What is Naira Devaluation? The quotes above from Governor Emefiele and a paper on Nigerian economic policy written in 1987 indicate that history has come full circle once again. Naira devaluation risky for foreign currency loans, says report – The devaluation of the naira against global currencies will impact negatively on foreign currency loans and weaken capital base for the lenders, banking sector report has shown. Instead of letting the naira depreciate in line with falling oil prices, CBN introduced rationing via an import license system. In September 1986, the parallel exchange rate in Nigeria was 5 naira per dollar, implying a premium of 230 percent over the official exchange rate of 1.5 naira per dollar. In September 1986, the parallel exchange rate in Nigeria was 5 naira per dollar, implying a premium of 230 percent over the official exchange rate of 1.5 naira per dollar. 4. The devaluation of the naira against global currencies will impact negatively on foreign currency loans and weaken capital base for the lenders, banking sector report has … Download historical data for 20 million indicators using your browser. Earlier, on December 15, South Sudan’s central bank dropped its fixed exchange rate. Two respondents said it was at least 20% too … Hence, an analyst once said, only a fool keeps all his wealth in naira. Do NOT follow this link or you will be banned from the site. It appears that Mark Carney, the former Governor of Bank of England might be right when he emphatically stated that currency “depreciations are how you make the economy poorer”. This meant a huge hidden tax on agriculture, since procurement prices were set with reference to the official exchange rate and little attention paid to international prices. Oil proceeds, which is a major source of revenue sharing for the government is deposited at the CBN and then converted to naira using the official exchange rate of N360/$1. Most of my then colleagues at the World Bank and IMF believed an equilibrium exchange rate of close to 1.5 naira to the dollar would emerge from the auction because Nigeria’s oil dollars (the bulk of foreign exchange earnings) were allocated at the official rate. kalu Aja, a financial analyst also said the country needs to build- up supply for dollar in order to end the naira devaluation streak. Even if $1 becomes N200, 000, if supply exceeds demand, the value will fall.” I vividly remember my 1985 conversation with an importer: “Would not there be an inflationary burst if CBN were to float the naira?” I naively asked. This period of naira stability was preceded by the introduction of the Investors and Exporters FX window in April 2017 and supported by a notable recovery in global oil price (2017 Brent price: 16.0% YoY to $54.77/barrel), following the collapse of the latter in 2016. The recent devaluation is “a step in the right direction,” said Temi Popoola, head of Nigeria at Renaissance Capital in Lagos. Thirty years ago, as a young economist at the World Bank, I studied foreign exchange markets across the developing world, including in Nigeria. In June, CBN declared 40 imported items as “not valid for foreign exchange in the Nigerian foreign exchange markets” purportedly to “conserve foreign exchange reserves as well as facilitate the resuscitation of domestic industries and improve employment generation”. With the parallel rate at 360 naira per dollar, this hidden tax on non-oil exporters currently stands at 45 percent. In January 2009, it virtually shut down the interbank foreign exchange market, fuelling a significant parallel market premium. These parallel markets have resurfaced in recent years, usually in countries with serious problems in economic governance. Parallel markets for foreign exchange (typically illegal) were rampant in Africa and Latin America during the mid 1980s. It decided to float the naira via an auction for foreign exchange. Aliko Dangote, president of the Dangote Group, says the devaluation of the naira will not affect the food fortification targets set by leaders in the Nigerian food industry. Download Vanguard News App. It is apparent that the parallel exchange rate is driven by the oil price, since oil accounts for 70 to 80 percent of government revenues and the lion’s share of Nigeria’s exports. This was perhaps the death blow to Nigerian agriculture and a big contributor to the growing concentration of oil in total exports. This argument is incomplete and ignores many important issues: the credibility of macroeconomic policy; subsidies for the rich hidden in the overvalued exchange rate; and the constraints placed on pricing and production  by new restrictions pushed by policy makers hoping to regulate their way out of the current currency crisis. Second, giving dollars at the official rate to importers meant handing them an instantaneous unearned profit of 3.5 naira (the difference between the parallel rate of 5 and the official rate of 1.5) per dollar received from CBN. Nigeria’s fiscal accounts and policy credibility will receive a much-needed boost from exchange rate unification. Nevertheless, CBN resisted devaluing the naira, arguing ironically that no useful purpose would be served because oil was virtually the only export! 3.Economic growth might increase. 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As a result of large fiscal and current account deficits during the boom period of 1973 to 1980, Nigeria’s foreign debt had grown to $19 billion by 1985. In contrast, Nigeria has taken steps to ration foreign exchange instead of letting the market determine the exchange rate after oil prices began their most recent fall. Devaluation of Naira on Nigerian Economy In 1986, the official rate of Naira to Dollar was about N1.5. By April 2015, when CBN reintroduced foreign exchange rationing with restrictions on credit cards, the dollar oil price had fallen some 40 percent from its peak in June 2014. This meant that private individuals with access to government could easily enrich themselves at the expense of the Nigerian people. While the Central Bank had pledged to move The United States (US) adopted Saturday a “new official” map of Morocco that includes the disputed territory... NdaniTV has released the official trailer for its brand new series, GAME ON. The Central Bank of Nigeria may have devalued the naira by as much as 15 percent with the introduction of a single exchange rate. The CBN’s latest devaluation suggests more money for the government as the conversion rate is now N379/$1. The naira was introduced on 1 January 1973, replacing the Nigerian pound at a rate of 2 naira = 1 pound. The Naira was resilient and enduring, … While the USDNGN spot exchange rate is quoted and exchanged in the same day, the USDNGN forward rate is quoted today but for delivery and payment on a specific future date. In November 2014, the CBN similarly devalued the naira from N155 per dollar to N168/$1 and further to N199/$1 following the falling oil prices and subsequent dwindling international reserves, . Looking forward, … 2. Quick History. Publish your articles and forecasts in our website. Despite efforts of the Government, it was not possible to hold these prices. Yet both have taken steps to eliminate parallel foreign exchange markets through appropriate, market-based exchange rate policy. How Technology is Helping People Working from Home? According to the governor, the Naira had already been devalued by about 28 per cent this year, just like many other currencies of the world. “You don’t understand,” he chided me. DEVALUATION OF NAIRA PROPHECY: On February 19th 2017, Prophet TB Joshua gave a prophecy regarding the devaluation of the Nigerian Naira currency. Naira Devaluation History The history of the naira shows that it has always depreciated since its inception. The Trading Economics Application Programming Interface (API) provides direct access to our data. In September 1986, the parallel exchange rate in Nigeria was 5 naira per dollar, implying a premium of 230 percent over the official exchange rate of 1.5 naira per dollar. By the mid 1980s, oil prices had collapsed from a supply glut following the oil price hikes of 1973-74 and 1979-80. “The inflation has already occurred through the parallel market. Moreover, this “profit” was at the expense of the Nigerian government. XE’s free live currency conversion chart for Nigerian Naira to US Dollar allows you to pair exchange rate history for up to 10 years. To be sure, the unified exchange rate will depreciate further if oil prices continue to drop; but this will be because Nigeria’s national income is falling and not because of the currency float. This is not the first time Nigeria’s currency has been devalued because of the drop in oil price. Nigeria must stop selling its valuable oil dollars cheap. Returning to a market-determined exchange rate via a float would probably lead to a new exchange rate close to that in the parallel market. 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The naira has been weakening against the U.S. dollar since June when the Central Bank scrapped the currency peg that had kept it at an artificially-high value of around 198 NGN per USD for over a year. Any reprieve Nigerian agriculture might have received after oil prices collapsed in the early 1980s never materialized because of bad exchange rate policy during the first Buhari regime. However, there would be no inflationary burst because domestic goods prices already reflect the parallel rate. Brethren! The powers at the time said: “Oil is dollar-denominated and virtually our only export. NGN to USD currency chart.   Nigeria’s latest devaluation of the official naira rate -- one of the West African nation’s multiple exchange rates -- has left traders perplexed. There was a government … All but four of the survey participants said the naira is more than 10% overvalued against the dollar. Understanding the NGN (Nigerian Naira) … Technical Feedback: whatsapp 08023469027 And with further devaluation of naira the scarcity of dollars and pounds will greatly magnify. Over the ten-year period from 1973-1983, the Nigerian government directed very little public spending towards agricultural research and development or enhancing rural infrastructure, unlike in similarly oil rich countries such as Indonesia which spent heavily to improve non-oil sources of revenue. However, by 1985, the economy was in a bad state with Nigeria’s foreign creditors insisting on an IMF program for rescheduling a relatively small sum of $2 billion. The coins of the new currency were the first coins issued by an independent Nigeria, as all circulating coins of the Nigerian pound were all struck by the colonial government of the Federation of Nigeria in 1959, with the name of Queen Elizabeth II on the obverse. The naira has witnessed relative stability, moving within a narrow band of N359-N370/$ since mid-2017. Speculations started March 12 that the naira might be devalued. This was seen as a key step in reestablishing macroeconomic policy credibility which has been in tatters since Argentina’s sovereign default of 2001. The naira has been continually devalued since its inception in 1973, and inflation remains above 10% as of 2019. A Nigerian newspaper and Online version of the Vanguard, a daily publication in Nigeria covering Nigeria news, Niger delta, general national news, politics, business, energy, sports, entertainment, fashion,lifestyle human interest stories, etc. The Nigerian Naira is expected to trade at 380.50 by the end of this quarter, according to Trading Economics global macro models and analysts expectations. COVID-19: N149bn to 317 beneficiaries The adverse effects of devaluation are humongous and insidious: Apart from massive unemployment and hyperinflation, the prices of food and essential commodities will be too expensive; beyond the reach of the suffering masses in a nation where 85 percent of the population survived with … This led to a series of steps to lower the fiscal deficit and eventually CBN was persuaded that it would be a good idea to unify the official and parallel exchange rates. On the 20th of February 2016, Nigeria’s President Buhari hardened his stance against devaluing the Nigerian Naira because he believes devaluation will not help the country “as it had few exports apart from oil and depended on imports whose cost would rise with such a move.” This view is shared by Governor Emefiele of the Central Bank of Nigeria (CBN), who noted on 17th November 2015 “Our major export commodity which accounts for more than 80% of our income is crude oil…and what is supposed to be the non oil export, we are not producing effectively.” CBN governor, Emefiele, also warned that that naira devaluation would lead to hyperinflation. The country is an oil exporter and embroiled in conflict. Fortunately, exchange restrictions were phased out later in 2009; but not before the CBN burned $17 billion to artificially prop up the naira. Kept at a steady rate of $360 by supporting the demand with Naira injection and ... Andrei Tapalaga ️ in History of Yesterday. It bled yesterday. Third, if the central bank were to unify the official and parallel rates by floating the Naira, this would lead to a large depreciation as the official rate merged with the equilibrium parallel rate. The Finance Director of Nigerian Breweries Plc, Rob Kleinjan, has revealed that the increase in the brewer’s costs of goods was due to the devaluation in naira and FX scarcity, which led to the increase in the cost of inputs such as sorghum and sugar, as they are not fully produced locally. Any inflationary impacts would come from the fiscal consequences of the float. It decimated non-oil exports and inexorably transformed the Nigerian economy over time into the “mono-economy” referred to by current Central Bank Governor Mr. Emefiele. The naira presently trades at 360 to the dollar. However, it is more of a result of the American government taking control of its currency exchange rate, which is against the rules stipulated by Bretten … For the benefit of those of us who do not know much about economy.Can the Economists in the house enlighten us on naira devaluation, the implications and the ripple effects and why the president is reluctant in doing that.in a simple language pls. READ our Privacy-policy and cookie policy. How did Nigeria get to that point? President Buhari’s intransigence and Mr. Emefiele’s hyperinflationary fears are unfounded because domestic goods pricing already reflects the parallel rate. It allows API clients to download millions of rows of historical data, to query our real-time economic calendar, subscribe to updates and receive quotes for currencies, commodities, stocks and bonds. But, Godwin Owoh, a professor of applied economics, said rate unification and devaluation are rooted in the corrupt practices and market manipulation that have brought the naira to its knees. The sudden change in the exchange rate in 1970 and 80s is not entirely down to what Nigerian government did. The chart below shows the value of the naira on the official and parallel markets against the decline in global oil prices. The minimum depreciation in any decade is 34%. After decades long of word counts and verbal exchanges on Naira devaluation and “oil subsidy removal”, yours sincerely is truly contestation weary on the twin policy issues. But it could also be capturing growing risk from macroeconomic uncertainty linked to the stop and go exchange rate policy: CBN was slow to let the naira depreciate when oil prices started falling with the onset of the global financial crisis in late 2008. In addition, as noted above, the premium was a ruinous hidden tax on the once-flourishing agricultural sector. 1995-2020 Data | 2021-2022 Forecast | Quote | Chart | Historical. Naira devaluation history Bismarck Rewane, said a combination of naira devaluation and forex controls by the CBN would save the country. The naira/dollar exchange rate and the government’s policies to address the issue has a long history behind it. The present situation is eerily similar to that which prevailed 30 years ago. All CBN will be doing is to slash my profit!”. This also made Nigeria the last former British colony to abandon the £sdcurrency system in favour of the decimal currency system. It is high time CBN and the Nigerian Government faced reality and avoided a costly repetition of history. Agriculture, once a mainstay of the economy and of non-oil exports, collapsed because of competition from cheap imports and neglect. Effect of Devaluation. The quotes above from Governor Emefiele and a paper on Nigerian economic policy written in 1987 indicate that history has come full circle once again. According to the famous quote from the philosopher George Santayana, “those who ignore history are doomed to repeat it.” Thirty years ago in 1986, Nigeria’s policy makers made the exact same argument against devaluing the naira under extreme pressure from a similar oil price collapse. Kalu said, “Supply is king. Nigerian Naira - data, forecasts, historical chart - was last updated on December of 2020. This fact had three important implications: First, the parallel exchange rate was the equilibrium exchange rate. An imported good costing one dollar was more likely to sell for 5 naira (the parallel rate in September 1986) than 1.5 naira (the official rate). On December 17, 2015, Argentina’s peso depreciated sharply, with the official exchange rate rising to 13.95 pesos per dollar from 9.8 pesos per dollar, much closer to the parallel rate of 14.5, after a new administration floated the currency. Trading Economics members can view, download and compare data from nearly 200 countries, including more than 20 million economic indicators, exchange rates, government bond yields, stock indexes and commodity prices. The official price of the dollar shot up by over 500 percent, from 2.95 South Sudanese Pounds per dollar to the parallel market rate of 18.50 per dollar. What purpose then would be served by an exchange rate adjustment?”. Despite the systematic Naira devaluation in the last 40years, Nigeria and Nigerians are yet to experience the goodies currency depreciation advocates promised. (vitag.Init = window.vitag.Init || []).push(function(){viAPItag.display("vi_949932995")}). But a 1985 World Bank survey showed that domestic prices of traded goods were more likely to reflect an exchange rate of 5 naira to the dollar. It must float the Naira to help its fiscal accounts and to prove that it can learn from its own past mistakes. Argentina and South Sudan are examples. For Nigeria the impact would be a positive lowering of the fiscal deficit and therefore, inflationary pressure. The main questions then: “what exchange rate would emerge from the float?” and “would there be an inflationary burst?”. At the same time, the parallel exchange rate provided N5 for one dollar. This Christmas season I had intended to engage in a critical investigation of religion given the powerful theological si... By Douglas Anele In spite of efforts to clean up the electoral process, rigging, violence and electoral manipulation of... By Denrele Animasaun ‘The writer cannot be a mere storyteller; he cannot be a mere teacher; he cannot merely x-ray socie... Naira devaluation or doom: Is Nigeria’s economic history repeating itself? Currencies Nigeria’s forex devaluation timeline – 2020. The USDNGN spot exchange rate specifies how much one currency, the USD, is currently worth in terms of the other, the NGN. The official rate was irrelevant from the perspective of the average consumer. The day before, it bled. We hate to be the bearers of bad news (or to be super dramatic by quoting Shakespeare’s Macbeth) but something potentially wicked this way comes.The thing in question is called Naira Devaluation and from the looks of it, it’s going to kick everyone’s asses. The £sdcurrency system in favour of the hidden tax on the once-flourishing agricultural sector the parallel at. 360 by supporting the demand with naira injection and... Andrei Tapalaga ️ in history of the drop oil. ” was at the same time, the parallel market premium $ naira devaluation history by supporting the with... Over this period, to 197 naira per dollar, this hidden from. 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