The Nigerian economy has been faced with serious foreign exchange crisis since the first quarter of the year, with severe pressure on the nation’s foreign exchange market and external reserve. The local currency is under the grip of tough external pressure, characterized by internal foreign exchange shortages and consistently high black-market rates. This has led to a high disparity between the official exchange rate and black-market rate.

The undesired situation is attributable to the crash in crude oil prices, triggered by the coronavirus pandemic that has impacted negatively on the global economy. The plunging oil prices have increased the pressure on the naira, as about 90% of Nigeria’s foreign exchange earnings is from crude oil exports.

Bank of Africa analysts, Rukayat Yusuf and Andrew MacFarlane, in its Global Bank’s latest report on Nigeria’s forex unification and shortages, said that Nigeria’s current foreign exchange pressure is likely to gain momentum in 2021, as the economy and imports recovery will trigger a future adjustment of the nation’s currency to N430/$1 next year.

Recall that despite several initial denials by the Central Bank of Nigeria (CBN), in response to the devastating impact of the coronavirus pandemic and oil shocks; the apex bank on March 20, 2020, devalued the exchange rate from N307/$1 to N360/$1. This was followed with the suspension of sales of foreign currency to the Bureau De Change operators on March 27, 2020, in the face of depleting external reserves.

In a move viewed as attempts by the CBN to unify the exchange rate, the apex bank further devalued the naira on August 6, 2020, from N360/$1 to N380/$1 on the official window and closed the gap with the parallel market – which is the unofficial market. The huge exchange rate gap has made round-tripping very lucrative and encouraged hoarding amongst forex dealers.

Goldman Sachs analysts had earlier predicted that the exchange rate will dip to N500 to $1 in the face of rising inflation and declining external reserves. The wide gap between the official and unofficial rates is seen by analysts as an indication of increasing pressure on the forex market and dollar shortages, which the CBN is trying to contain with several policies targeted at reducing the demand for the greenback, conserve the scarce foreign exchange, and help boost dollar supply in the market.

Some of these policies include:

• Resumption of sales of dollars to the Bureau De Change Operators and mandating them to sell at not more than N386 to a dollar.
• Removal of third parties from buying forex routed through Form M.
• Clampdown on exporters who refuse to repatriate their export proceeds to Nigeria.
• Restriction on forex allocation to importers of maize by the Deposit Money Banks (DMBs).

However, despite some of these measures by the CBN, the disparity between the official and black-market rates still remain as high as almost N70. So, the question is why the huge gap? Especially, with the resumption of dollar sales to the BDCs.

Some analysts and stakeholders have complained that the measures are hurting business operations and pushed more demands to the parallel market. They believe it has encouraged hoarding and speculations to continue thriving; thereby, making it difficult to reduce the black-market rate.

What they are saying

While expressing his view on why the exchange rate disparity is still high, despite the resumption of dollar sales to BDCs; the President of Association of Bureau De Change Operators of Nigeria (ABCON), Aminu Gwadebe, said the impact of the resumption of sales of foreign exchange to BDCs is expected to be gradual.

Gwadebe said, “Firstly, the impact is gradual. You know there was a time when the dollar reached N500/$1. N474, N480 to a dollar was when there were other interventions in the market. As soon as the news of the resumption of sales to Bureau De Change broke, we witnessed the dollar going for as low as N420, N430 to a dollar. However, after taking off, the rate is now N460, which is the parallel market rate.

“Don’t forget there is a huge backlog and every other buyer – authorized or unauthorized, queued in the parallel market. So, the pressure is on the parallel market from manufacturers and existing investors. In fact, the most unfortunate behavior is hoarding and speculation.’’

The ABCON President noted that people hoard and speculate when liquidity is low in the retail sector of the market. He pointed out that, although the liquidity is gradual, the rebound is expected to continue gradually.

Gwadebe said the role of the BDCs is to provide liquidity in the retail end of the market, which is what the CBN is empowering the BDCs to do and a key reason the rate has improved from the record high of about N480/$1.

He noted that the resumption of sales of dollars to BDCs is discouraging frivolous demands, adding liquidity into the system, aiding return of confidence and stability in the market.

He reiterated that the BDCs remain the only threat to hoarding and speculation, while expressing satisfaction that the reserve is growing and will increase the confidence of investors.

Fast-growing decentralized finance (DeFi) protocol, Harvest Finance, has increased its bounty from $100,000 to $1 million for details of an unknown cyber hacker – leading to the return of $24 million in siphoned funds taken recently.

What you should know

According to tweets seen on its official Twitter handle – Harvest Finance anonymous, Harvest is offering the bounty of $1M for “tracking down” the attacker and returning the funds.

At the moment, the attacker is known to:

• understand flashloans
• understand arbitrage and trading
• understand the curve internal code
• understand renBTC
• understand opsec

💵Increasing the bounty for tracking down the attacker and returning the funds to $1M

Here's what we know about the attacker:

1) understands flashloans
2) understands arbitrage and trading
3) understands curve internal code
4) understands renBTC
5) understands opsec

1/2

— Harvest Finance (@harvest_finance) October 29, 2020

Why it’s happening

Harvest Finance’s bounty is coming on the back burner when it observed its protocol was apparently hacked, with the cyber hacker reportedly exploiting about $24 million from Harvest Finance pools and swapping for renBTC (rBTC).

• Hence, Harvest Finance affirmed the hack, stating the protocol is “working actively on the issue of mitigating the economic attack on the Stablecoin and BTC pools.”
• To protect users, we’ve pulled y pool and btc curve strategy funds to the vault.
• At this point, all Stablecoin and BTC funds are in the vault (not deployed in a strategy). No other pools are affected.
• To be specific: to protect users, 100% of Stablecoin and BTC curve strategy funds have been withdrawn from the strategy to the vault.

About Harvest

Harvest, a new (DeFi) platform created on the Kava blockchain, plans to launch a product that will enable users to earn more on Bitcoin, XRP, Binance coin, and two other cryptos.

Harvest offers crypto users the platform to supply crypto assets for lending, and earn interest on them, as well as, use their crypto as security for borrowing; this is according to Brian Kerr, Kava’s co-founder and Chief Executive.

The Ministry of Foreign Affairs announced in a statement that Nigeria’s candidate for Director-General of the World Trade Organization, Dr. Ngozi Okonjo-Iweala, has secured the support of the majority of the member-nations – but is yet to be declared and returned as the winner, as the United States is opposing the consensus.

This was announced in a statement by the Ministry on Thursday evening to inform the nation that the third and final round of the selection process of the WTO DG position was formally announced on Wednesday 28th October 2020.

Ministry of Foreign Affairs, Abuja __________________________________
PRESS RELEASE pic.twitter.com/K557KyJQzO

— Ministry of Foreign Affairs, Nigeria 🇳🇬 (@NigeriaMFA) October 29, 2020

What you should know

Nairametrics reported this week that Dr. Ngozi Okonjo-Iweala is close to being appointed as the new Director-General of the World Trade Organisation (WTO).

A group of ambassadors also known as “troika” had proposed Okonjo-Iweala to lead the WTO giving her a clear path to becoming the first woman to head the WTO since it started 25 years ago. The three ambassadors are thought to wield significant powers in determining what is a very “intricate and opaque” process.

The U.S President, Donald Trump blocked the appointment of Ngozi Okonjo-Iweala as the WTO’s next DG on Wednesday, citing support for South Korea’s Yoo Myung-hee.

Dr. Okonjo-Iweala stated that she is positive despite hiccups in her bid to emerge as the next DG of the organization. She said, “Happy for the success & continued progress of our WTO DG bid. Very humbled to be declared the candidate with the largest, broadest support among members and most likely to attract consensus. We move on to the next step on Nov 9, despite hiccups. We’re keeping the positivity going.”

The Ministry of Foreign Affairs said in its statement that, “Dr. Ngozi Okonjo-Iweala has secured the support of the majority of the member countries, but is yet to be declared and returned the winner. This is because apart from winning the election, all 164 Member States of WTO were expected to adopt the winner by consensus. In accordance with the rile of the procedure of the WTO.”

It is important to highlight that Dr. Okonjo-Iweala has secured cross-regional backing with only the United States opposing the consensus.

The Ministry added that a meeting would be held by the General Council of the WTO on the 9th of November 2020 to declare a final decision on the election process.