The Central Bank of Nigeria has issued a circular instructing commercial banks to sell dollars to Pilgrims going to the Hajj at an exchange rate of N197.
The Central Bank explains that the sale of the forex will be funneled through commercial banks who are then mandated to sell to pilgrims at N197. Pilgrims are expected to purchase a minimum of $750 and a maximum of $1000 per pilgrim.
The circular also reveals there are a total of 65,197 Pilgrims, thus the CBN will sell as much as $65,197,000 assuming every Pilgrim buys as much as $1000 each.
Nigeria’s official exchange rate closed at about N315 which suggest that this sale could cost Nigerian tax payers about N7, 693, 246,000 in exchange rate loss (based on 315 -197=118).
This is not the first time the Central Bank is selling dollars to Pilgrims at a subsidized rate. Last August it also sold dollars at N160 at a time when the official exchange rate was about N197. Only that this time, the disparity is wider.
The implication for Nigerian tax payers is that the government is now incurring this sort of expense at a time when the economy is likely in a recession and millions are finding it hard to feed themselves. It is also at a time where the Nigerian government is running cap in hand begging foreign investors to invest in Nigeria so that we can boost our external reserves.
It also calls to question suspicions that government officials may be getting travel allowances at a different exchange rate from what is obtainable at the official interbank market.
The Central Bank of Nigeria floated the Naira on the 20th of June 2016 following a year-long policy of holding the exchange rate at a fixed rate of about N197/$1. Since floating the naira, the exchange rate has depreciated by as much 60% at the interbank and over 100% at the parallel market. The dollar closed at about N400 at the parallel market on Thursday.