- Nigerians are buying the U.S. dollar because they have lost confidence in the Naira, Gwadabe says
- The Nigerian central bank (NCB) has accused currency speculators in the country of being behind the local currency’s recent plunge to a new record of ₦710 against the dollar
- Despite the currency continuing depreciation on the parallel market, the Central Bank of Nigeria (CBN) insists the Naira’s official exchange rate against the dollar remains at approximately ₦424 for US$1
- The leader of a Nigerian association of bureau de change operators has smeared mud on crypto trading for the Naira’s recent plunge
The back and pull between crypto adoption and the depreciation of the Naira is intensifying. The CBN is attributing the drop in value of the Naira to speculators.
The situation is not getting any lighter. A recent report by CoinGecko has ranked Nigeria as the most curious country regarding crypto adoption in Africa. Nigerians are still buying the dip, a situation translating to a long-term outlook of a cryptocurrency-motivated future.
Nigerians protect their value by converting to USD
The parallel market exchange rate of the Naira against the dollar recently plunged to a new low of ₦710 per dollar. According to reports, the currency’s rapid depreciation is being fueled by Nigerians converting their savings from the Naira to the dollar.
Read: Why Nigerians should be wary of Central Bank Digital Currencies
Yet, despite the currency continuing depreciation on the parallel market, the Central Bank of Nigeria (CBN) insists the Naira’s official exchange rate against the dollar remains at approximately ₦420 for US$1.
Osita Nwanisobi, the director of corporate communications in the bank, blamed speculator traders for causing the currency’s recent plunge.
Nigeria has put in place interventions to cushion the Naira but it has proven an uphill task. Among the interventions by central bank include;
The Naira for Dollar incentive scheme
This initiative was meant to serve two purposes;
- Encourage remittance inflow to the country through the CBN licenced International Monetary Operators IMTOs
- Encourage people to hold the Naira over the growing preference of trading cryptocurrencies.
The scheme stated that all recipients of remittances through the Central Bank IMTOs would receive an additional ₦5 for every US$1 received.
However, the Naira for Dollar remittances incentive scheme has failed to help halt the naira depreciation.
The incentive was scheduled to end in May last year, and since then, the Nigerian currency has consistently gone down.
The RT200 FX Programme
The Central Bank of Nigeria’s intention through this programme is to pay exporters ₦65 for every US$1 repatriated and sold to Authorised Dealer Banks (ADBs) through the Investors and Exporters FX Window for third-party use.
The CBN will pay ₦35 for every US$1 repatriated and sold into the I&E Window for “own” use on eligible transactions. The CBN would pay incentives quarterly.
The RT200 FX Programme will benefit exporters involved in non-oil made in Nigeria goods and permissible goods and services in IT and Creative businesses.
These programmes are already helping Nigeria address the persistent foreign exchange shortage problem. Resolving the country’s foreign exchanges helps to stabilize Naira’s exchange rate.
Crypto Trading Fueling Naira Depreciation
In addition, Osita Nwanisobi, the director of corporate communications in the bank, said that the central bank interventions were working. He called on Nigerians to help “shore up the value of the naira.”
Aminu Gwadabe, president of the Association of Bureau de Change Operators of Nigeria, also suggested that crypto trading may be fueling Naira’s depreciation.
“The USD rate on the crypto floor determines the value of the local currency,” Gwadabe explains. Nigerians are buying the U.S. dollar because they have lost confidence in the Naira, Gwadabe says.