Despite the over $130bn deployed by the Central Bank of Nigeria (CBN) to defend the naira and a myriad of policies churned out to shore up its value over the past six years, the Nigerian currency has depreciated by over 209.2 per cent, sliding from N196.99 to a dollar in December 2015 to N412.06/$ in September 2021.
The depreciation is even higher at the parallel market with one dollar which sold for about N230 in December 2015 now going for almost N550 in September 2021.
Nigerian Tribune findings revealed that between 2016 and the first quarter of the current year, the apex bank sold as much as $130.6billion to foreign exchange market operators in its various interventions just as it had come up with tens of policies to salvage the sagging national currency.
Between January and December 2016, the CBN defended the naira with about $11.7 billion, according to documents and reports accessed on the CBN website, . The figure rose to $15.8billion in 2017, was $36.6billion in 2018, hit $34.3bn in 2019 and came down to $27.84billion in 2020.
The CBN has in the first quarter of 2021 spent $4.37bn to defend the naira. The documents showed that in its effort to stave off pressure on the naira, the CBN sustained its direct intervention in the inter-bank foreign exchange market to ensure exchange rate stability.
Also, in the various times it sold dollars at the foreign exchange market, made up of the inter-bank spot, invisibles, the SMEs, at the I&E window and as forwards sales. Although deploying dollars in defence of naira has mitigated the pressure on the naira, the exercise has also depleted the nation’s foreign reserves which currently stood at $33.32billion as of June 30, 2021, about a quarter of what had been deployed to saving the naira.
Explaining the rationale behind deploying the nation’s external reserves to defend the naira, Emefiele said the CBN Act mandates the apex bank to defend the national currency, adding that “A flexible exchange rate would not favour the poor. I am committed to protecting the Naira. We cannot allow the Naira to float freely.”
Mr Godwin Emefiele in his tenure as CBN governor has witnessed the rollout of a number of policies meant to shore up the value of the naira. This started in June 2015 with the stoppage of the sale of dollars to those engaged in the importation of 41 items that could be produced in Nigeria.
The apex bank explained that it took that decision to “conserve foreign reserves as well as facilitate the resurrection of domestic industries and improve employment generation.” In January 2016, the CBN governor, during a press conference, announced that the apex bank would no longer sell dollars to BDCs.
According to Mr Godwin Emefiele, “The Bank would henceforth discontinue its sale of foreign exchange to BDCs. Operators in this segment of the market would now need to source their foreign exchange from autonomous source. They must however note that the CBN would deploy more resources to monitoring these sources to ensure that no operator is in violation of our anti-money laundering laws.”
The CBN governor added that the measures were not punitive but meant to guarantee the preservation of the nation’s resources and stabilize the financial system. The CBN however later reversed itself and resumed the sale of dollars to BDC operators.
In 2017, the CBN introduced a new window for investors, exporters and end-users with a view to increasing liquidity and forcing down the exchange rate. But that didn’t achieve much as the slide of naira continued. In 2018, the CBN increased the number of items banned from accessing foreign exchange to 42 as it imposed foreign exchange ban on fertiliser importation.
This was contained in a circular entitled: “Re: Inclusion of some imported goods and services on the list of items as ‘Not Valid for Foreign Exchange in the Nigerian Foreign Exchange Market.”
The circular signed by Ahmed Umar, Director, Trade and Exchange Department, stated: “In the continued effort to sustain the achievement recorded from the classification of 41 items as ‘Not valid for foreign exchange’ in the Nigerian foreign exchange market, authorised dealers and the general public are hereby notified of the inclusion of fertiliser on the lists effective Friday, December 7, 2018.”
In March 2020, the CBN devalued the naira by changing the official exchange rate from N307/$1 to N360/$1.
In May 2020, the CBN governor directed businesses and individuals to stop patronizing the parallel market for foreign currency exchange.
Later in July of the year, the apex bank extended forex restriction to maize importation, saying the decision was borne out of the need “to increase local production, stimulate a rapid economic recovery, safeguard rural livelihoods and increase jobs which were lost as a result of the ongoing COVID-19 pandemic.”
In March 2021, the CBN introduced the Naira for Dollar policy for Diaspora remittances. The policy offers recipients of Diaspora remittances to be paid N5 for every $1 received as remittance inflow.
In July 2021,the CBN announced the stoppage of forex sales to Bureau De Change operators for illegal forex trading and economic sabotage. The CBN also announced that new BDCs would not be registered.