Nigeria’s naira has been navigating turbulent waters across both official and unofficial markets in recent weeks, spurred by heightened forex demand and a notable surge in the prices of goods and services nationwide.
Last week, the local currency experienced significant fluctuations, trading at an average of N1500 and above in the spot market and closing the week at N1,665.50/$1 – its lowest point ever recorded in this segment according to data from FMDQ.
Similarly, in the parallel market, amidst speculation and uncertainty surrounding forex supply, the naira continued its downward spiral, reaching a record low of N1,700 and above, driven by increased demand and market instability.
In response to this concerning trend, the Nigerian government embarked on a series of decisive measures and reforms aimed at safeguarding the country’s foreign exchange market and combating speculative activities.
The government’s interventions appear to be yielding positive results, particularly in the unauthorized forex market, with the naira showing slight appreciation over the weekend.
Market data indicates that the dollar was exchanged at N1,500 to a dollar on Sunday, a notable improvement from the previous week’s rates.
One of the key steps taken by the federal government to address the naira depreciation was the blocking of online platforms belonging to Binance and other crypto firms.
Restriction on Digital Assets Platforms
This move aimed to prevent the manipulation of the forex market and curb illicit fund movements.
Additionally, the National Security Adviser directed law enforcement agencies to crack down on individuals engaged in forex market speculation.
Moreover, the government announced plans to raise $10 billion to enhance liquidity in the forex market.
Crackdown on Currency Racketeering
In a bid to tackle currency racketeering head-on, the Economic and Financial Crimes Commission (EFCC) conducted raids and arrested numerous Bureau de Change (BDC) operators across various regions.
These raids, executed simultaneously, targeted currency speculators and individuals undermining the Nigerian economy.
Notably, 115 suspected currency racketeers were apprehended in Enugu State, with recoveries including substantial sums of money in various currencies.
CBN Reforms
The Central Bank of Nigeria (CBN) also introduced several directives aimed at addressing the naira depreciation crisis.
These included discontinuing cash payments for Personal and Business Travel allowances (PTA/BTA), promoting electronic channels for processing these allowances, and advising the Nigeria Customs Service to adopt official forex rates for import duty calculations.
Furthermore, the CBN issued revised regulatory and supervisory guidelines for BDC operations, prohibiting certain entities from owning BDCs and outlining strict regulations for forex transactions.
Surveillance Measures
To prevent further depreciation of the naira, the Nigerian government intensified surveillance on illicit activities in the forex market, particularly ahead of the Federation Account Allocation Committee (FAAC) meeting.
There were concerns within the apex bank that corrupt state governors were illegally converting FAAC funds to dollars in the unofficial market, destabilizing the foreign exchange market.
Security operatives were mobilized to monitor forex markets closely over the weekend, signaling the government’s commitment to stabilizing the market and protecting the value of the local currency.
In conclusion, the concerted efforts of the Nigerian government, particularly through regulatory interventions and law enforcement actions, demonstrate a proactive approach towards stabilizing the naira and restoring confidence in the country’s foreign exchange market.
