Just a few days after plummeting to its worst exchange rate against the U.S. dollar ever, the Nigerian currency was trading at around 820 units for every dollar on Nov. 8, a report has said. An economist has suggested that the Central Bank of Nigeria’s controversial currency plan is unlikely to halt the naira’s depreciation or tame inflation.
EFCC’s Crackdown on Currency Dealers
The Nigerian currency’s parallel market exchange rate versus the U.S. dollar rebounded from an all-time low — 900 units per dollar — seen at the start of the month to around 805:1 by Nov. 8. Some reports have attributed the naira’s recovery to the Economic and Financial Crimes Commission (EFCC)’s crackdown against suspected illegal foreign currency dealers.
As reported by EdaFace.com News on Nov. 5, the naira’s latest quick-fire depreciation was prompted by the Central Bank of Nigeria (CBN)’s new 100, 200, 500, and 1,000 banknotes announcement.
While the central bank’s plan to replace old banknotes with redesigned banknotes has won the backing of President Muhammadu Buhari, some Nigerian experts, as well as the International Monetary Fund (IMF), have warned of the possible consequences of implementing the plan.
Exacerbating the Naira’s Woes
Yet, despite the mounting criticism and warnings, the CBN has stuck to its guns and will reportedly start issuing the new banknotes on Dec. 15 as planned. The central bank has said all the banknotes that are set to be demonetized must be returned on or before Jan. 31, 2023.
However, according to one Nigerian economist, Bismarck Rewane, for the CBN’s plan to succeed, Nigerian banks will need to exchange banknotes worth over $105 million (87 billion naira) every day. Besides exacerbating the naira’s woes, Rewane reportedly said the CBN’s currency plan will not solve Nigeria’s inflation problem.
Meanwhile, despite the naira’s fall to record levels versus the greenback on the parallel market, on Nov. 9 the currency was still pegged at around 450 per dollar on Nigeria’s official forex market.
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