Naira had been floated by CBN.
Naira had been fluctuating ever before the floating
The Naira fell even more on Thursday in the black market, trading in Abuja at N945 to the dollar as opposed to N925 the day before.
However, the Naira closed at N781/$1 on the official market known as the Investors and Exporters (I&E) window as opposed to its opening rate of N782/$1.
Consequently, on Thursday, the International Monetary Fund said Nigeria’s loose fiscal and monetary policies created excess liquidity.
The Washington-based fund explained the inadequate fiscal policies as the reason the Naira could not stabilize against the dollar two months after the Central Bank of Nigeria liberalized the forex market.
CBN floated the Naira; however, the country’s currency had continued to fluctuate since the introduction.
The CBN has begun addressing the pent-up demand for foreign exchange, according to acting governor Folashodun Shonubi.
Meanwhile, the Nigerian Naira is severely undervalued, according to economic modeling that uses purchasing power parity, said Folashodun Shonubi, the acting governor of the Central Bank of Nigeria (CBN), on Thursday.
This information was disclosed in a lecture on “Diaspora Remittances and Nigeria Economic Growth” that was given at the National Institute of Security Studies (NISS) in Abuja.
“If you were to conduct an economic modeling of Nigeria using purchasing power parity, you would discover that the Naira is currently significantly undervalued,” Shonubi stated.
He emphasized the need for stringent measures to control illegal remittances and direct them into appropriate channels to maximize economic growth.
Shonubi also said that a panel would be set up to conduct surprise visits to banks suspected of illegally selling dollars.
“We need to name and shame commercial banks involved in such malpractices,” he said.
The acting governor further highlighted the challenges with the current remittance system, where the cost of sending money to sub-Saharan Africa from the diaspora stands at around 8-9% per $100, the highest in the world.
Interestingly, he explained, Nigeria received approximately $16.7 billion in remittances, but the bulk of this money remains outside the formal market.
“We are striving to encourage individuals to bring money into the formal sector instead of relying on informal channels, as it has become challenging to manage,” Shonubi added.