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CBN to “introduce” uniform exchange rate for naira

The Central Bank of Nigeria (CBN) has decided to collapse the multiple exchange rate policy which was used to determine the value of the Naira and move to a single exchange rate policy.

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The Central Bank of Nigeria (CBN) is allegedly planning to collapse the multiple exchange rate policy of the CBN moving to a single exchange rate policy. This is according to sources from the bank.

Some inside sources who want to remain anonymous disclosed that the country will merge the official rate, the rate for bureau de change (BDC) operators, the rate for importers and exporters, and some others.

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A senior central bank official who does not want to be identified, said, ‘Today we allowed the rate at the importer and exporters (I&E) window to adjust in response to market developments’

The CBN official admitted that in today’s transaction, that it had adjusted the rate at the I&E window for foreign investors from N366 per dollar to N380 per dollar.

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READ MORE: Foreign investors shun CBN as latest OMO bills record zero bids

Some economic and financial experts including global financial institutions like the International Monetary Fund (IMF) have been very critical of the multiple exchange rate system which has been operational in Nigeria. The country has been operating this system which pegged the official rate at about N305 per dollar, in a bid to control demand for dollars.

Government businesses and some selected priority companies like importers of petrol usually benefit from the supply of cheap foreign exchange. However, the CBN created an importer and exporter window in 2017 as a reaction to the economic recession in 2016, providing a market where forex can be traded at market-determined prices.

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The single exchange rate has been identified as a very effective tool for resource allocation. Analysts are of the opinion that the multiple exchange rate can be subject to abuse and manipulation, possibly aiding corruption.

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Chike Olisah is a graduate of accountancy with over 15 years working experience in the financial service sector. He has worked in research and marketing departments of three top commercial banks. Chike is a senior member of the Nairametrics Editorial Team. You may contact him via his email- [email protected]

11 Comments

11 Comments

  1. Olalekan Johnson.

    March 21, 2020 at 9:11 am

    When it is time for election in Nigeria, Nigeria politicians will always do all it’s takes to be in that particular seat being contested for, and when they’ve finally achieved their aim; then they will be saying it is not easy, it is not easy. Nigerians please don’t be deceived. Fellow Nigerians please don’t be deceived. Our leaders know what should be done to make Nigeria better; but they failed to do it. Please!!.

  2. Olalekan Johnson.

    March 21, 2020 at 9:12 am

    When it is time for election in Nigeria, Nigeria politicians will always do all it’s takes to be in that particular seat being contested for, and when they’ve finally achieved their aim; then they will be saying it is not easy, it is not easy. Nigerians please don’t be deceived. Fellow Nigerians please don’t be deceived. Our leaders know what should be done to make Nigeria better; but they failed to do it. Please!!. The wise knows and the foolish also know he is foolish!!!.

    • Anonymous

      March 21, 2020 at 10:20 am

      Maybe you had an encounter with one of them??. Why so pissed?. Nigerian leaders have always been bad.. it’s no surprise but then among the bad ones lie the good ones who are not even given any chance.. Nigerian politics can never be meaningful

    • Elizabeth Adenike Kentebe

      March 21, 2020 at 11:33 am

      If by having uniform exchange rate, Nigeria and Nigerians will benefit. I go for it. I am really surprised that when dollar is falling all over the world, dollar keep on rising in Nigeria. Please I am begging people that are suppose to do things right to fear God.

      • Anonymous

        March 22, 2020 at 9:22 am

        Dollar is not rising. Naira is falling

  3. Momoh-Bello Isah

    March 21, 2020 at 4:00 pm

    I hope this move will benefit and boost Nigeria economy

  4. Ben Davis

    March 21, 2020 at 7:27 pm

    Why is Our leaders so selfish at the expense of our dear Country Nigeria? Over 15 years Dstv multi Choice has conveniently been extorting the Nigerian Masses yet Our Govt did nothing about it, is it new to our Govt that other African Countries like Kenya, Mozambique, Ghana etc are operating on pay per view package ? After they’ve connive with multi Choice to embezzle enough and something’s went wrong hence suddenly they realise that Multi Choice is Extorting from Nigerians, who is fooling who Nigeria Government?

  5. Saheed Akinyemi

    March 21, 2020 at 10:24 pm

    If u.s dollars are falling globally and the same currency is getting high in Nigeria that’s shows that we don’t have a good economy the so called leaders or rulers cares most about themselves and their family only they leave the masses at a peril, ordinary Nigeria are not helping neither

    • Olu

      March 22, 2020 at 10:04 am

      Your comments are correct about our leaders, however, the exchange rate is determined by the market which the govt has no control over. The issue of multiple exchange rate wasn’t a good idea and thankfully it’s now been adjusted to a single rate which will plug some holes that the privileged have been taking advantage of in the last few years.

      The Naira will fall as a result of the fall in oil prices because the country (Nigeria) now earns less than 50% of what it was earning in USD about a month ago. Furthermore, it is not correct that the USD is falling globally, infact, it is getting stronger as the demand for the USD is stronger in times like this as the currency of choice to back up your reserve. An example is the case of the sterling which has dropped significantly vs USD in the last couple of weeks – so also are other currencies

  6. Imo-owo J. Akpan

    March 21, 2020 at 10:50 pm

    We Nigerians are following the CBN’ s Single rate Policy , we Thank you our Dear CBN Governor God will Bless you in Jesus Name Amen.

  7. Anonymous

    March 23, 2020 at 2:48 pm

    This not good at all we have many problems to deal with not this one .

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Around the World

Shell considers relocating its headquarters to the UK

Royal Dutch Shell has consistently pushed for the Dutch Government to stop taxes on dividends.

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GLOBAL GAS vs SHELL: COURT SETS ASIDE AWARD OVER BREACH OF CONTRACT, Investors, shareholders shocked as Shell reduces dividend

Oil and gas giant, the Royal Dutch Shell, is considering moving its corporate headquarters from The Netherlands to Britain. This could be a move against the implementation of dividend tax in The Netherlands.

The move was disclosed by the oil company’s Chief Executive Officer, Ben Van Beurden, during an interview with a Dutch newspaper on Saturday, July 4, 2020. According to him, the oil giant is not ruling out relocating its headquarters from the Netherlands to Britain. He said:

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You always need to keep thinking. Nothing is permanent and of course we will look at the business climate. But moving your headquarters is not a trivial measure. You cannot think too lightly about that.”

Further confirming the Chief Executive Officer’s comment, a Shell spokesman told Reuters that the oil giant is looking at ways to simplify its dual structure, as it had been doing for many years.

Royal Dutch Shell has consistently pushed for the Dutch Government to stop the tax on dividend paid to shareholders, as this makes financing dividend, share buy-backs and acquisition a lot more difficult.

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An earlier attempt by the Dutch Government to stop the dividend tax as an incentive to convince Unilever to unify its dual structure in Rotterdam, was met with an outcry by the public, who see that as a gift to rich foreigners.

It can be recalled that Shell had announced a few days ago that it might likely write down between $15 billion-$22 billion in post impairment charges for the second quarter of 2020. The impairment, which is its largest since the merger with Shell Transport and Trading Company Ltd in 2005, shows the huge adverse impact that the coronavirus pandemic has had on the oil giant’s businesses.

Also, in a move that shocked investors, Shell for the first time since the Second World War, cut down the dividend that it paid to its shareholders by two-thirds due to the negative impact of the pandemic. The decision came as a surprise to many including shareholders of the oil company which is by far the biggest payer of dividend in the FTSE 100.

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Coronavirus

Governor David Umahi of Ebonyi tests positive for COVID-19

Umahi has directed those who worked in the budget review for 2020 to immediately test for COVID-19.

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David Umahi, Ebonyi State workers will not get salaries for this reason

The Governor of Ebonyi State, David Umahi has tested positive for COVID-19, reported on Saturday afternoon.

Umahi’s Special Assistant on Media, Mr. Francis Nwaze, confirmed the news and also revealed that some associates of the governor also tested positive.

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He also said that the Governor is not showing any symptoms of the disease, though he has isolated himself in line with the NCDC protocols.

“The governor has directed his Deputy, Dr Kelechi, to coordinate the state’s fight against the disease and appealed to the citizens to take the NCDC protocols seriously.

READ MORE: Governors may push for 42% of federal allocation in new sharing formula

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“He will currently be working from ‘home’ and will be conducting all meetings virtually,” Nwaze added.

David Umahi becomes the sixth Nigerian governor to test positive for the disease, Governors of Kaduna, El- Rufai, Bauchi, Bala Mohammed and Oyo, Seyi Makinde have fully recovered while the recent cases have been the Governors of Ondo, Rotimi Akeredolu and Delta, Ifeanyi Okowa.

On Thursday, Governor Umahi announced that the state’s Executive Council was finalizing the budget review required by World Bank and said “most us broke down and are being treated of malaria.”

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He also directed those who worked in the budget review for 2020 to immediately test for COVID-19 and admitted he is expecting a second test result after he initially tested negative in March.

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Economy & Politics

Nigeria’s debt rises to $79.5 billion, as debt to revenue ratio worsens

According to data obtained from DMO, $27.66 billion (N9.9 trillion) is the total external debt.

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Nigeria's Debt to revenue ratio, DMO suspends April 2020 FGN savings bond offer

Nigeria, Africa’s largest economy’s total public debt rose to $79.5 billion (N28.63 trillion) as of the first quarter of 2020, which is March 31, 2020. This represents a 15% increase from the figure that was recorded for the corresponding period in 2019, which was about $69.09 billion (N24.94 trillion).

This was disclosed in a latest publication by the Debt Management Office (DMO) on Friday June 3, 2020.

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Nigeria has seen its debt stock rise sharply in recent years as the country tries to fund infrastructural and developmental projects and boost its fragile economy, which has been in and out of recession. The country’s economy has been projected to fall into recession again, due to the adverse impact of COVID-19 that has seen oil prices crash globally.

According to data obtained from DMO, $27.66 billion (N9.9 trillion) is the total external debt. This represents 34.89% of the total public debt stock. Whereas, $51.64 billion (N18.64 trillion) is the total domestic debt, which represents 65.11% of the total public debt.

READ MORE: Nigeria borrows N754 billion in 3-month, total debt now N25.7 trillion  

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The Federal Government accounts for 50.77% of the total domestic debt, which is $40.26 billion (N14.53 trillion), whereas the State Governments and Federal Capital Territory account for 14.34% of the total domestic borrowing which is $11.37 billion (N4.11 trillion).

Nigeria has been under a lot of fiscal crisis following the crash of oil prices triggered by the coronavirus pandemic. The oil sector accounts for about 90% of the country’s foreign exchange earnings and about 60% of its total revenue.

The country, which had lined up a series of debt issue this year, had to halt the external commercial borrowing due to oil price collapse. The Minister for Finance, Zainab Ahmed, had last week disclosed that the country would no longer go ahead with its Eurobond debt issue.

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READ ALSO: Lagos debt hits N39.6 billion, to borrow N97 billion more

The Nigerian government, for now, is focusing on the domestic markets and concessionary loans to help fund the 2020 budget deficit which is made worse by drop in revenue. In the recently approved 2020 revised budget, the federal government is expected to borrow N850 billion from the domestic market.

This rising debt has put a lot of pressure on the government’s resources as it spent $1.69 billion (N609,13 billion) to service its domestic debt in the first quarter of 2020 alone.

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Nairametrics had reported that Nigeria’s global rating is at risk due to the sharp rise in the country’s sovereign debt and a growing finance gap. According to a report from the global rating agency, Fitch Ratings, this could trigger a rating downgrade as policymakers struggle to stimulate growth and deal with the impact of low oil prices and sharp drop in revenue.

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According to Fitch, the country’s debt to revenue ration is set to deteriorate further to 538% by the end of 2020, from the 348% that it was a year earlier.

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