Naira falls to historic lows as CBN delays rate decision

    In response to worries about the postponing of the Monetary Policy Committee meeting, the naira continued its wild plunge on Thursday, falling to a record low of 1,050 per dollar on the black market.

    As demand for dollars surpassed supply, the naira, which last traded at 980/$ on Wednesday, sank even more.

    On Thursday, the Central Bank of Nigeria (CBN) postponed a rate-setting gathering planned for September 25–26. The acting governor and four deputy governors have resigned, thus creating a policy-making void at the top. Its replacement governor, former Citigroup executive Olayemi Cardoso, has not yet been approved in his position.

    The Monetary Policy Committee (MPC), which is presided over by the governor of the Central Bank of Nigeria (CBN), convenes every two months to make decisions regarding the Monetary Policy Rate (MPR), also known as the benchmark rate.

    The MPC is the CBN’s highest-ranking policymaking committee, and its duties include reviewing the financial and economic conditions of the country’s economy, determining the best course of action for the short- to medium-term, and routinely reviewing the monetary policy framework and making modifications as needed.


    Additionally, it successfully informs the public about monetary and financial policy actions and upholds the validity of the transmission mechanism model for monetary policy.

    Except in cases of necessity, the MPC meets every two months.

    Since May 2022, the CBN has maintained a hawkish monetary policy stance to control inflation.

    According to CBN data, the CBN increased its benchmark interest rate at its most recent meeting in July for the eighth time in a row, from 11.50 percent in May 2022 to 18.75 percent.

    A new date would be announced in due time, the CBN stated in a notice posted on its website and signed by Isa AbdulMumin, director of corporate communications.

    Nair falls against Dollar

    No implication is made. The date of a meeting was likely postponed until new management could take over, according to Yemi Kale, partner and chief economist at KPMG Nigeria, on Thursday.

    The head of macro strategy at FIM Partners UK Ltd., Charlie Robertson, stated: “I assume the incoming CBN governor needs more time to forge a consensus before a decision on interest rates. It makes reasonable for the CBN to coordinate research and the MPC around a shared perspective because any policy change will necessitate effective communication.

    Following a surge in demand for dollars from people going overseas for business, school, medical treatment, or tourism, the value of the naira continued to decline.

    A statistics and intelligence organization called Stears Africa FX Monitor has forecast further naira volatility.

    Fiscal policies, international trade, and market movements, such as inflation, interest rates, political developments, and geopolitical issues, were cited by the corporation as important influences on the performance of the naira.

    Stears’ head of insights Fadekemi Abiru voiced worry about the naira’s volatility. “The continued unpredictability of the naira underscores the importance of timely and informed decision-making for businesses and investors in Nigeria,” she stated.

    As the central bank refrained from delivering dollars to a panicked market, the naira continued to decline and sped up toward the 1,000/$ mark in street trade.

    A currency dealer in Wuse, a suburb of the nation’s capital, named Yahaya Adamu claims that traders in Abuja valued the dollar for N998 on Thursday. According to Umar Salisu, a foreign exchange operator who analyzes the data in Lagos, the dollar was exchanged there roughly 990 times.

    As I speak to you, you are unable to find $1,000 to spend because dollars are so limited, Adamu remarked.

    The official exchange rate for the naira, which closed on the FMDQ OTC trading platform on Wednesday at 770.71 per dollar, is currently around 29 percent weaker than the parallel market rate. When the nation’s newly elected president Bola Tinubu announced significant currency reforms in June, the two rates momentarily converged, but they have progressively separated ever since.

    Market participants claim that the central bank has mostly stayed out of the picture this month, with one claiming that it has hardly provided dollars to the official window. The naira’s decline from about 900 per dollar at the beginning of September has been sped up by this.

    Meanwhile, ordinary Nigerians who anticipate further naira depreciation have joined businesses seeking hard cash to pay for imports by purchasing dollars.

    CBN is currently undergoing a complete overhaul; as a result, there won’t be any continuity of policies, as the previous governor and his appointees were dismissed rather than retiring, which would have allowed for continuity. Therefore, we are eager to see a new policy, according to Onoja Usman, managing director and CEO of Lovonus Microfinance Bank Limited.

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