Unravel the Central Bank of Nigeria’s strategies to counter the drastic Naira depreciation. Discover the dynamics of Nigeria’s economic landscape.
Recently, Nigeria’s currency, the Naira, faced a turbulent decline, sparking worries across different economic sectors.
To counter this, the Central Bank of Nigeria (CBN) has intensified efforts to restore stability.
What are the implications for Nigeria’s economy, and what are the CBN’s goals?
Unearthing the Root of the Crisis
The drastic devaluation of the Naira, now exceeding N950/$1 in the parallel market, stems from the acute shortage of foreign exchange.
There are whispers of deposit money banks diverting a chunk of their foreign exchange reserves to the unofficial markets instead of attending to their customers.
If this holds water, then it’s a significant blow to the economy’s integrity.
Central Bank of Nigeria’s Firm Stance against Illicit Activities
During a pivotal lecture in Abuja, acting CBN Governor, Folashodun Shonubi, shed light on the bank’s perspective on the issue.
His emphasis? A crack down on corrupt financial activities.
Unauthorized dollar sales by commercial banks are on CBN’s radar, with Shonubi affirming, “We won’t hesitate to call out banks involved in underhanded practices.”
The High Cost of Remittances: A Global Perspective
A shocking revelation from Shonubi centered on the exorbitant fees associated with diaspora remittances to Sub-Saharan Africa.
Imagine this: for every $100 sent home, around 8-9% disappears in fees, making it one of the most expensive remittance corridors in the world.
Informal Channels: The Silent Drain
The allure of informal channels for remittances can’t be denied.
Their convenience and unregulated nature attract many.
However, these channels, akin to unruly rivers, are challenging to control and siphon crucial funds away from the official foreign exchange market.
Rebranding the Foreign Exchange Market
The previously termed I&E market is undergoing a metamorphosis.
Shonubi declared the upcoming transformation of this market to the Nigerian Foreign Exchange Market, affirming its central importance.
The National Institute of Security Studies Weighs In
Ayodele Adeleke, a key figure at the institute, emphasized the significance of understanding these financial dynamics for national security.
Such lectures and discussions form the bedrock of the institute’s extensive 10-month course.
Parallel Market: A Detour for Diaspora Remittances?
A surprising revelation indicated that the bulk of diaspora remittances, though arriving in Nigeria as dollars, evades official documentation.
This absence of tracking leads to a massive influx into the unregulated parallel market.
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What caused the depreciation of the Naira?
The scarcity of foreign exchange coupled with allegations of banks diverting reserves.
What stance has the CBN taken against unauthorized dollar sales?
They are committed to identifying and condemning banks involved in these practices.
Why are informal channels for remittances a concern?
They divert funds from the official exchange market, making regulation difficult.
What is the future of the I&E market?
It will be rebranded as the Nigerian Foreign Exchange Market.
How do diaspora remittances affect the parallel market?
A large portion of these remittances enters the parallel market due to lack of official documentation.