Naira tumbles to N850/$ as dollar scarcity worsens

The Naira yesterday plunged to a new low against the dollar on the unofficial market, trading at N850/$ as dollar scarcity persists.

The naira is however stable at the official market, where it exchanges at N439.88/$, data from the Central Bank of Nigeria (CBN) website shows.

The local currency, which closed last week at N772/$ at the parallel market, has come under intense pressure with more depositors converting cash to dollar to protect their assets.

In emailed note to investors, Forex Dealer with AZA Finance, kenga Kalu, said Nigerians are rushing to buy dollars after the CBN announced plans to redesign high value Naira notes by mid-December.

“The spread between the official and unofficial rates is now more than 88 per cent, the largest ever gap, according to Bloomberg. The note redesign is intended to mop up excess funds, reduce counterfeit notes and hamper ransom payments from terrorists and kidnappers,” Kalu said.

During the announcement, CBN Governor, Godwin Emefiele, said old bank notes- N200, N500 and N1,000 denominations- still in circulation by the end of January next year will be void.

The CBN expressed concern about the amount of currency in circulation outside of the banking system, reducing the efficacy of its policy levers.

“With dollar demand continuing to outpace supply, and with no more central bank support in the parallel market, we expect the Naira to lose further ground in the near term,” he said.

The CBN said it will be mopping up N3.23 trillion from circulation to tackle rising inflation.

He said that of the N3.23 trillion cash in circulation as at September 2022, N2.73 trillion is outside the vault of banks.

Emefiele said both the funds within and outside the banking system will be mopped up from today till January 31, 2023 to the CBN’s vault to control rising inflation

According to him, currency management is a key function of the Central Bank of Nigeria, as enshrined in Section 2 (b) of the CBN Act 2007.

Therefore, the integrity of a local legal tender, the efficiency of its supply, as well as its efficacy in the conduct of monetary policy are some of the hallmarks of a great Central Bank.