Nigeria has sharply devalued its currency for the second time in eight months, as the west African country bids to clear up its messy system of exchange rates and attract investment to its flailing economy.

The naira has tumbled this week after the methodology used to calculate the official exchange rate was changed, taking the currency closer to the black market rate.

The move is widely seen as part of market-friendly reforms being introduced by Bola Tinubu, who became president last May and who shortly afterwards jettisoned the years-long peg instituted by the former central bank chief that had kept the currency artificially high.

However, the country still kept an official rate that was well above the freely-traded rate, which made it more expensive for multinational companies wanting to invest in Nigeria.

Charlie Robertson, head of macro strategy at asset management firm FIM Partners, said the new methodology could help Nigeria attract more investment as it essentially abolishes the multiple exchange rates that frustrated investors.

“It could take months but there could be more dollars swirling around in Nigeria now that the currency is officially very cheap,” Robertson said.

FMDQ Group, which calculates the country’s official exchange rate, announced on Friday that it was revising its methodology to “address recent fluctuations and challenges encountered” in Nigeria’s highly volatile foreign exchange market, where the official exchange rate often trailed parallel market values. The publication of exchange rates was suspended that day.

The revised exchange rate system, which FMDQ began publishing this week, will ensure that “rates accurately reflect market conditions while upholding price formation and transparency”, the firm said.

The currency fell by nearly 40 per cent to 1482.57 to the dollar on the official market on Tuesday and slipped as low as 1,531 on Wednesday, according to FMDQ. That took the naira past N1,475 to the dollar it is trading at on the black market, according to one trader.

Nigeria’s central bank on Monday took aim at authorised dealers and their customers, which it said were reporting “inaccurate and misleading information” on their transaction rates, leading to distortions in the official market.

“This behaviour is not compliant with the ethical standards associated with a sound financial market, and deliberate attempts to create price distortions by reporting false transaction details amounts to market manipulation which will not be tolerated and will henceforth face sanctions,” the bank said.

The naira has plumbed new depths since the peg was removed as a lack of foreign exchange liquidity stalled planned reforms.

The central bank owes about $5bn in mature forward contracts to different groups in the Nigerian economy that sold naira to the bank in exchange for dollars. FIM’s Robertson warned that this backlog would have to be resolved and short term interest rates needed to rise significantly to attract portfolio investors.

It is a slight improvement on the $7bn the bank owed at the start of the tenure of its new governor Olayemi Cardoso, a former Citigroup executive. The bank has pledged to settle the backlog “within a short time” and said it hopes to fix the “fundamental issues that have hindered the effective operation of the Nigerian foreign-exchange markets”.

But sources of dollar inflows into Nigeria remain hard to find. Investment into the country has fallen drastically and crude oil production, from which it earns roughly 90 per cent of its export income, is short of its 1.8mn barrels per day Opec quota. Central bank data shows it has $32.87bn in foreign exchange reserves, although almost $20bn of this was committed to paying off a series of derivatives deals.

Investors remain wary of bringing hard currency into the country as dollar shortages have made it difficult for businesses to repatriate revenues to their home countries.

Foreign airlines operating in Nigeria last month threatened to strike over their inability to get money out of the country. Dubai-based carrier Emirates suspended its flights to and from Nigeria in 2022 and has yet to return. Nigeria said this week it released $64.4mn of trapped airline funds but the International Air Transport Association said there was still $700mn left to be paid out.

Finance minister Wale Edun said in Davos last month that Nigeria is seeking about $1.5bn from the World Bank to ease liquidity concerns. Last year he said the country had a “line of sight” on $10bn in inflows in the country but that has yet to materialise. A scheme that saw the state oil company pledge oil in exchange for dollars from the African Export-Import Bank (Afrexim) netted Nigeria $3bn last month.

A senior western diplomat whose country has companies operating in Nigeria told the Financial Times that businesses remain unconvinced by the government’s announcements of potential dollar inflows to ease the pervasive hard currency shortages.

On a visit to Nigeria last week, US secretary of state Antony Blinken mentioned that the inability to repatriate capital was an “impediment” to American investors maximising opportunities in Nigeria.

chopnaira:

This is what Reno posted.

Mordecai:
Reno Omokri don post another one.

With all his half-baked financial analysis.

Half-education is proving to be worse than none.

“It could take months but there could be more dollars swirling around in Nigeria now that the currency is officially very cheap,” Robertson said.

The central bank owes about $5bn in mature forward contracts to different groups in the Nigerian economy that sold naira to the bank in exchange for dollars. FIM’s Robertson warned that this backlog would have to be resolved and short term interest rates needed to rise significantly to attract portfolio investors

On a visit to Nigeria last week, US secretary of state Antony Blinken mentioned that the inability to repatriate capital was an “impediment” to American investors maximising opportunities in Nigeria.

chopnaira:

This is what Reno posted.

The Naira is a reflection of the Nigerian. Look, the Central Bank of Nigeria just paid a billion dollars to foreign airlines. Those are airlines flying the same route as Air Peace. Do you know that if you and I, as Nigerians, had flown Air Peace instead of foreign airlines, that $1 billion would have stayed and circulated in Nigeria? And when dollars and pounds stay in Nigeria, the Naira rises in power. If they leave Nigeria, our Naira goes lower and lower.

The Central Bank had to cough up $200 million to pay for human hair, as if God did not give our women hair. This is hair that Indian, Bangladeshi, and Southeast Asian women cut and dedicate to their temples. They then barely process the hair and label them Brazilian, European, and Peruvian hair, and our women rush to buy them, wear them, and shake the hair angrily to accuse Tinubu of ruining the economy. If I were Tinubu, I would ban the importation of human hair. Fact-check this, as a nation, Nigeria spends more on human hair than on books.

The Naira is now our collective responsibility. When you go to Quilox to spend ₦5 million on Moët, Louis XIII Cognac, and Glenfiddich, then post your receipt on social media, you are putting downward pressure on the Naira.

Containers on the high seas coming to Nigeria with things we can produce in Nigeria are killing the Naira. There is no magic wand. If we don't band together to stand together and buy made in Nigeria, the Naira will continue to go asunder!

#TableShaker

gaby:


This one is communist reasoning....lol

As if the people who booked the flights didn't pay for the flights and the government just woke up to cough out $1B on their behalf.

Dem dey always want use big big grammar dabaru poor people brains.

I disagree with this submission in its entirety.

adamusuleiman2:
Move leaves official exchange rate close to black market rate and follows removal of currency peg last year



https://www.ft.com/content/1729aa7c-3f92-4ff7-9310-c79b5e5cdb8

Mindlog:


Same Reno went to Kenya to spend foreign currency just to celebrate his birthday last month.

chopnaira:

This is what Reno posted.

The Naira is a reflection of the Nigerian. Look, the Central Bank of Nigeria just paid a billion dollars to foreign airlines. Those are airlines flying the same route as Air Peace. Do you know that if you and I, as Nigerians, had flown Air Peace instead of foreign airlines, that $1 billion would have stayed and circulated in Nigeria? And when dollars and pounds stay in Nigeria, the Naira rises in power. If they leave Nigeria, our Naira goes lower and lower.

The Central Bank had to cough up $200 million to pay for human hair, as if God did not give our women hair. This is hair that Indian, Bangladeshi, and Southeast Asian women cut and dedicate to their temples. They then barely process the hair and label them Brazilian, European and Peruvian hair, and our women rush to buy them, wear them, and shake the hair angrily to accuse Tinubu of ruining the economy. If I were Tinubu, I would ban the importation of human hair. Fact-check this, as a nation, Nigeria spends more on human hair than on books.

The Naira is now our collective responsibility. When you go to Quilox to spend ₦5 million on Moët, Louis XIII Cognac, and Glenfiddich, then post your receipt on social media, you are putting downward pressure on the Naira.

Containers on the high seas coming to Nigeria with things we can produce in Nigeria are killing the Naira. There is no magic wand. If we don't band together to stand together and buy made in Nigeria, the Naira will continue to go asunder!

#TableShaker

matify83:
Interesting time ahead .

Our economy is overheating like the Fukushima nuclear reactor following the 2011 Japan earthquake.

The Financial regulator - CBN in several botched attempts at cooling down the economy has continued to blame every market player in the FX market but itself.

Firstly, they said Aboki FX was the major culprit for the abysmal performance of the naira, then they went heavy handed on BDCs. When those didn't save the plummeting naira, they blamed us for hedging against the naira by buying dollars to save under our beds.
They have banned and unbanned some 43 items they are confused if they are actually draining our dollar reserves.
Today, they have descended on our deposit money banks warning them to reduce their FX liquidity to only 5 Billion and sell off the rest to them.

The other day, they were paying off huge FX backlogs up to the tune of 2.5 billion dollars so far, yet the nation thirsts for "Benjamins" to carry on its basic functions. Show me a MAN who spends all his remuneration paying "Gbese" and leaving the house to suffer want, and I will show you a FOOL.

I see an institution (CBN) clutching on straws as it drowns in the river of gross incompetence.

We labeled some NLanders pessimists when they predicted that the naira will hit 1500 to the dollars. It didn't take 3 months for it to come true.

I humble suggests that Ms. Hadiza Bala (Asiwaju's class monitor) pencils the finance minister and Cardoso as the first to be shown the door for not meeting the nation's expectations.

Let's remind ourselves of the definition of INSANITY once more:

Doing the same thing over again and expecting a different result.

EKONGKING:
Another elephant in the room is Insecurity ,why would any foreigner invest in a country where half of the country is under control of terrorists.

Nigeria is on a path to disintegration or worse a failed country like Congo .

Its high time we stop our delusion that we are a rich country or Nigeria is a giant .

years of mismanagement from independence has contributed to the rot .

Nigerian citizens are equally to blame like politicians, producing kids like their is no tomorrow and leaving them with no education (in North ) and making them to be religious terrorist or bandits ,while south produces half baked graduates who become yahoo boys or cultists in Nigeria or become a lower paid employee in Oyinbo land .

If you think only politicians are responsible ,check out the richest ethnic groups in USA and UK .

Indians, Chinese ,South Koreans dominate the top 10 ,If Nigerians are held back by corrupt politicians in their native country ,what is stopping them to achieve greater heights in western countries .

You bet they dont , An average Nigerian in diaspora prefers to do prayers or produce kids like hell to achieve success ,instead of learning newer technologies in their respective jobs ,to advance themselves .

chrisxxx:
If devaluing currency helps anyone America and the UK would have done it since.

Mordecai:
Reno Omokri don post another one.

With all his half-baked financial analysis.

Half-education is proving to be worse than none.




My point exactly. That was gibberish.

If it was all about that, the Japanese Yen would be a very strong currency.

Or you mean to tell me the UK produces far more than the US?

Or that Benin Republic now produces far more than Nigeria?

He is just being clownish with all that trash analysis.

Until the unbridled looting by Government officials is controlled, there is nothing anyone can do. And I don't see APC doing anything to stop it. It's a party policy.

Meanwhile the goat can keep up with his misinformation. He will post on Twitter and then repost on NL as adamusuleiman2.