Nairametrics| It’s been exactly 248 days since the CBN launched the flexible exchange rate regime and since then the parallel market exchange rate has depreciated by about 33% against the dollar. Between January 2015 and June 2016 when the official exchange rate was held at N197, the exchange rate had depreciated by 41%, depreciating from N203 to about N345 at the black market. That was a period of 1 year six months compared to a depreciation of 33% in just over 7 months to February 2017. To date, the exchange rate has depreciated by about 60% from January year to date and 68% since the currency crisis began in 2014.
Data from our parallel market archives reveal Nigerian exchange rate suffered a 29% depreciation against the dollar in 2015 while it was 45% depreciation against the dollar in 2016. The disparity between the official CBN and black market rates is at an all time high of N211/$1.
The CBN Governor, Godwin Emefiele introduced the new system on June 15, 2016 with unsuspecting Nigerians believing that the currency was now fully floated against the dollar and other major world currencies. Unfortunately, that has not been the case as the CBN has all but held the currency fixed at N305 while allowing about 8 other “official exchange rates” under its watch.
A look back at this policy decision suggest it has been nothing but a disaster. It has had incredible consequences for the economy at least from the standpoint of its implementation. One frequently used measure of the effectiveness of a country’s exchange rate policy is its disparity between the official and parallel market rates.
The National Executive Council last week pressed on the CBN Governor to change the forex policy of the CBN considering the wide disparity between the parallel and the black market. The CBN Governor responded by requesting for more time. There are strong indications that the exchange rate policy might be reviewed at the next monetary policy meeting.