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N1000/$: The Fall and Fall of the Naira

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By Eric Elezuo

This is not the best of times for the Nigerian Naira as market forces continue to work to its detriment, leading to a rush for the few available Dollars, and in turn falling to all time low.

On Thursday, a Bloomberg report quoted one Yahaya Adamu, a currency dealer in Wuse, a suburb of the nation’s capital, Abuja, Traders in Abuja as saying that the dollar was quoted at N998, just N2 short of N1000.

Also, in the commercial hub Lagos, the dollar is changing hands for around 990, according to Umar Salisu, a foreign-exchange operator who compiles the data in Lagos, noted Bloomberg.

This explains in a nutshell that the Nigerian naira extended its slide and hurtled toward the 1000-per-dollar mark in street trading, as the central bank held back from supplying dollars to a panic-stricken market.

Explaining further, Adamu informed tgat “Dollar is so scarce now that as I speak to you, you cannot find $1000 to buy,” Adamu said.

The currency’s parallel-market rate is now about 29% weaker than the official exchange rate, where the naira closed Wednesday at 770.71 per dollar on the FMDQ OTC trading platform. The two rates had briefly converged soon after the country’s newly elected president Bola Tinubu announced sweeping currency reforms in June, but they have diverged steadily since then as dollar supply from the central bank fell short.

The central bank has mostly been on the sidelines this month, according to market players, with one person saying it has barely supplied dollars to the official window. That has helped accelerate the naira’s slide, pushing it down from around 900 per dollar at the start of September.

Meanwhile, companies seeking hard currency to pay for imports have been joined in dollar buying by ordinary citizens who are fearful of further depreciation in the naira.

On Thursday, the central bank postponed a rate-setting meeting scheduled for Sept 25-26. Its new governor, ex-Citigroup executive Olayemi Cardoso, is yet to be confirmed in his role, while the acting governor and four deputy governors have resigned, effectively leaving a policy-making vacuum at the top.

Recall that since June when President Bola Tinubu tingled with the nation’s monetary policy, the naira has headed on a free uncontrolled fall. Tinubu touched on monetary policy and indicated his preference for a low interest rate regime to stimulate economic growth and employment.

Following the policy, the Central Bank of Nigeria announced immediate changes to operations in the Nigerian Foreign Exchange (FX) market, abolishing its hitherto multiple exchange rate windows and collapsed them into the business-based Investors and Exporters (I&E) window.

“All segments are now collapsed into the Investors and Exporters (I&E) window. Applications for medicals, school fees, BTA/PTA, and SMEs would continue to be processed through deposit money banks,” Dr Angela Sere-Ejembi, a director of the bank said in a message to authorised dealers of forex.

FX operators and other market operators had predicted a couple that the naira will hit N1000, going by prevailing circumstances and indices, and today, the prediction has come to pass with no tangible clue that status quo ante as at May 2023 may be maintained.

In his defence, the Minister of Finance, and Coordinating Minister of the Economy, Adebayo Olawale Edun, said that up to $6.8 billion of overdue forward payments in the foreign exchange market was responsible for the slump in the naira and until it is addressed before the local currency can stabilise.

He explained that once unpaid contracts are resolved, it will help the naira become stronger and “pave the way for additional foreign exchange flows.”

While Nigerians await Edun’s prescription to come to pass, they look up the new Governor of the Central Bank of Nigeria, Michael Cardoso in collaboration with Efun to find a path to restoration as the populace groans in the hardship the present situation is unleashing on residents.

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CBN Releases 16 Banking Transactions Not Affected by Cybersecurity Levy

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Following the Central Bank of Nigeria’s directive that all banks should commence charging a 0.5 per cent cybersecurity levy on all electronic transactions within the country, below are 16 banking transactions that are exempted from the CBN’s new cybersecurity levy:

  1. Loan disbursements and repayments
  2. Salary payments
  3. Intra-account transfers within the same bank or between different banks for the same customer
  4. Intra-bank transfers between customers of the same bank
  5. Other Financial Institutions instructions to their correspondent banks
  6. Interbank placements,
  7. Banks’ transfers to CBN and vice-versa
  8. Inter-branch transfers within a bank
  9. Cheque clearing and settlements
  10. Letters of Credits
  11. Banks’ recapitalisation-related funding – only bulk funds movement from collection accounts
  12. Savings and deposits, including transactions involving long-term investments such as Treasury Bills, Bonds, and Commercial Papers.
  13. Government Social Welfare Programmes transactions e.g. Pension payments
  14. Non-profit and charitable transactions, including donations to registered non-profit organisations or charities
  15. Educational institutions’ transactions, including tuition payments and other transactions involving schools, universities, or other educational institutions
  16. Transactions involving bank’s internal accounts such as suspense accounts, clearing accounts, profit and loss accounts, inter-branch accounts, reserve accounts, nostro and vostro accounts, and escrow accounts.

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CBN Directs Banks to Charge 0.5% Cybersecurity Levy on Electronic Transfer

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The Central Bank of Nigeria (CBN) has directed banks and other financial institutions to implement a 0.5 percent cybersecurity levy on electronic transfers.

This is contained in a circular signed by Chibuzor Efobi, Director of Payments System Management and Haruna Mustafa, Director of Financial Policy and Regulation on Monday.

The directive was issued to commercial, merchant, non-interest and payment service banks, as well as mobile money operators.

CBN said the policy would take effect in two weeks and charges would be described as ‘Cybersecurity Levy’.

According to the apex bank, the deduction and collection of the cybersecurity levy is a sequel to the enactment of the Cybercrime (prohibition, prevention etc) Amendment Act of 2024.

“Following the enactment of the Cybercrime (Prohibition, Prevention, etc) (amendment) Act 2024 and under the provision of Section 44 (2)(a) of the Act, “a levy of 0.5% (0.005) equivalent to a half percent of all electronic transactions value by the business specified in the second schedule of the Act, is to be remitted to the National Cybersecurity Fund (NCF), which shall be administered by the Office of the National Security Adviser (ONSA),” CBN said.

CBN said the charges would be remitted to the national cyber security fund, which would be administered by the office of the NSA.

“Deductions shall commence within two (2) weeks from the date of this circular for all financial institutions and the monthly remittance of the levies collected in bulk to the NCF account domiciled at the CBN by the 5th business day of every subsequent month.”

CBN said failure to remit the levy is an offence which attracts a fine of not less than 2 percent of the annual turnover of the defaulting business, amongst others.

“Finally, all institutions under the regulatory purview of the CBN are hereby directed to note and comply with the provisions of the Act and this circular.”

Meanwhile, earlier, banks announced the reintroduction of 2 percent charge on deposits above N500,000.

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Naira Slumps to N1,399/$1 in Official Window, N1,430/$1 in Parallel Market

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The Naira continued its slump against the American dollar for the seventh consecutive day on Friday, in both the official and parallel windows.

The domestic currency traded at N1,399.23/$1 and N1,430/$1 respectively.

This is according to data sourced from the Nigerian Autonomous Foreign Exchange Market (NAFEM) window.

At the end of trading on Friday, the Naira lost N89.35 against the dollar when compared to the previous exchange rate of N1,309.88/$1 on Thursday, April 26, 2024.

The intra-day high and low recorded during the day were N1,410/$1 and N1,05/$1 respectively, representing a wide spread of N359/$1.

Similarly, the Naira slumped against the dollar at the parallel section of the market for the seventh consecutive day to trade at N1,430/$1 representing a loss of N10 when compared to the N1,420/$1 it traded the previous day.

However, the Naira gained against the pound. The domestic currency appreciated by N50 against the British Pound to trade at N1,650/£1 as against the previous trading price of N1,700/£1 representing a gain of N50 for the local currency,

The Canadian dollar however closed flat against the Naira to trade at N1,000/CA$1 same as the previous trading day rate.

The Euro also slumped against the Naira to trade at N1,450/€1 as against the rate of N1,500/€1 the previous trading rate indicating a gain of N50 for the Nigerian currency.

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