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The apex bank had last Wednesday directed Deposit Money
Banks to remove the rate cap on the naira at the official Investors and
Exporters’ Window of the foreign exchange market, to bridge the gap between the
official and parallel market rates of the naira.
It said, “The Central Bank of Nigeria wishes to inform all
authorised dealers and the general public of the following immediate changes to
operations in the Nigerian Foreign Exchange Market: Abolishment of
segmentation. All segments are now collapsed into the Investors and Exporters
window.”
Following the move, the naira fell from its 471/dollar to
664.04/dollar and closed the week later at N663.04/dollar.
The weakening of the naira against the dollar means
exporters, especially the Federal Government, will make more revenue (in naira
terms) from exports’ dollar proceeds.
According to the International Trade Center, Nigeria’s total
export in 2022 was $63.34bn. At N448.55/dollar (the central price of the dollar
as of December 30, 2022, on the CBN’s website), its naira equivalent was
N28.41tn. But now (using Friday’s rate of N663.04/dollar), its naira equivalent
would translate to N41.99tn.
If Nigeria exports the same quantity it did in 2022, it will
make about N41.99tn. And with the government’s plan to ramp up oil production,
which is a major component of the country’s export, Nigeria’s export value is
expected to increase.
Data from the multilateral agency, which has a joint mandate
with the World Trade Organisation and the United Nations, which gets its data
from the National Bureau of Statistics and the United Nations COMTRADE, showed
that Nigeria made N25.78tn ($57.47bn) from its largest exported commodity, oil
and mineral fuel. This was despite a slump in oil production due to pipeline
vandalism and crude oil theft.
A recent report by The PUNCH estimated that between January
and July 2022, Nigeria’s oil production slumped by 28 million barrels.
In January, the Group Chief Executive Officer, Nigerian
National Petroleum Company Limited, Mele Kyari, stated that the country could
achieve 2.2mb/d of crude oil production in 2023.
The CBN’s move came after President Bola Tinubu made a call
for the unification of exchange rates during his May 29 inauguration speech.
He said, “The central bank must work towards a unified
exchange rate. They should direct the fund from arbitrage to meaningful
investment.”
The latest CBN move is expected to increase the government’s
revenue, which has been on a free fall for a while.
In a statement supporting the policy, JP Morgan, said, “Of
course, a weaker exchange rate means the government would receive higher naira
revenues from oil and gas exports.
According to the Director-General of the Nigerian
Association of Chambers of Commerce, Industry, Mines and Agriculture, Olusola
Obadimu, exporters will now be getting the real value of their exported
commodity due to the unification of exchange rates.