The Nigerian currency, Naira, experienced a slight decline against the United States dollar on the spot market, according to recent data published by FMDQ. This article examines the implications of this fluctuation and explores the recent gains witnessed in the unofficial market segment. Additionally, it delves into President Bola Tinubu’s call for a unified exchange rate and a comprehensive review of Nigeria’s monetary policy.
Naira’s Depreciation on the Spot Market
On Wednesday, the Naira witnessed a marginal decrease of 0.04% against the US dollar, as indicated by FMDQ’s data. The exchange rate stood at N464.50 per dollar during the previous trading session on Tuesday. However, by the end of Wednesday’s trading, the Naira had settled at N464.67, fluctuating between intraday highs and lows. The total forex supply in this market segment amounted to $163.74 million during the specified business period.
Gains in the Unofficial Market Segment
In contrast to the spot market, the Naira demonstrated a notable gain in the unofficial market segment on Wednesday, according to currency dealers in Abuja. The exchange rate for the US dollar in this segment was reported at N740.00, which is a significant improvement compared to the range of N750.00 to N770.00 observed the previous week. This increase in the unauthorised market segment has garnered attention, given its swift occurrence within a span of fewer than 72 hours after President Bola Tinubu’s inauguration speech.
President Bola Tinubu’s Call for a Unified Exchange Rate
During his inaugural speech, President Bola Tinubu stressed the need for the Central Bank to work towards achieving a unified exchange rate. This statement has sparked discussions and raised expectations among market participants. A unified exchange rate would imply a convergence of the various exchange rates currently in operation across Nigeria. This move could lead to increased stability and transparency in the forex market, attracting more investors and boosting economic growth.
Thorough House Cleaning of Monetary Policy
President Tinubu’s address also highlighted the importance of a comprehensive review of Nigeria’s monetary policy. The nation currently operates with multiple exchange rates, which can create distortions and inefficiencies in the economy. A thorough house cleaning of the monetary policy would involve streamlining and harmonizing these rates to ensure consistency and coherence. Such reforms can enhance the overall effectiveness of monetary policy measures, leading to a more stable and prosperous economy.
The recent fluctuations in the Naira-to-dollar exchange rate have both positive and negative implications. While the spot market witnessed a slight depreciation, the unofficial market segment experienced a significant gain. President Bola Tinubu’s call for a unified exchange rate and a comprehensive review of Nigeria’s monetary policy has raised hopes for greater stability and transparency in the forex market. It remains to be seen how these developments will unfold and impact Nigeria’s economy in the long run.
