Naira gains as Buhari rules out quick unification of rates

President Muhammadu Buhari has said his administration cannot unify the naira exchange rates because the local unit is still “susceptible to external shocks” that can affect Nigerians.

The president said this in a written response to Bloomberg after being why his government has not heeded calls from the International Monetary Fund and World Bank to unify the exchange rates at the official and parallel markets.

“The exchange rate is still susceptible to external shocks that can suddenly and severely affect Nigerian citizens,” Mr Buhari said.

He said the country will move toward unification only after raising domestic production of refined fuel and food, import items largely responsible for foreign exchange shortages.

“As we (Nigeria) step up domestic production – both in fuel (enabled by PIA) and food (agricultural policies) – the inflationary threat shall diminish, and we can move toward unification,” he said.

Within the past seven years of Mr Buhari’s tenure, naira has declined significantly from about N196 a dollar to N420 at the official market. The black market has recorded a steep fall with the currency falling to above N600 to a dollar.

Amidst the coronavirus pandemic that affected oil revenue, the Central Bank of Nigeria in March 2020 alone devalued the currency three times, putting immense pressure on the nation’s reserves. The bank has resisted calls by the IMF and the World Bank for a merger of the multiple rates.

On Tuesday, Naira recorded a marginal gain against the U.S dollar on Tuesday, a day after the currency depreciated at the spot market.

According to data posted by FMDQ, where forex is officially traded, the currency opened trading at N420.71 and closed at N420.27 to a dollar at the close of the day’s business.

The figure implies a N1.06 or 0.3 per cent appreciation from N421.33 it traded in the previous session on Monday. The local currency reached an intraday high of N413.00 and slipped to a low of N444.00 before settling at N420.71 per $1.

Forex turnover skyrocketed by 135 per cent with $108.06 million recorded as against $46.07 million posted in the previous session on Monday.

However, the domestic currency depreciated further at the black market on Tuesday. At the Uyo and Abuja street markets, dealers exchanged the naira at N605.00 and sold at N607.00 and above to a dollar.

With this, the margin between the official and unofficial markets is pegged at N184.73, leaving a spread of 30.5 per cent.