The Nigerian currency, the naira, has reached a new all-time low of NGN950 per dollar, continuing its downward slide against the greenback. Acting Governor of the Central Bank of Nigeria, Folashodun Shonubi, asserts that the naira is currently undervalued, despite its depreciation. The International Monetary Fund (IMF) has attributed the naira’s decline to Nigeria’s “loose” fiscal and monetary policies.
The naira’s recent plunge came shortly after breaching the 900 per dollar mark for the first time. There are concerns that Nigerian authorities may consider abandoning the floating exchange rate regime, which was adopted in mid-June. The ongoing shortages of the greenback on the formal and informal markets have contributed to the naira’s downward spiral. Predictions of further depreciation in the coming weeks have been made by Nigerian economic commentators.
Amidst the currency’s decline, Acting Governor Shonubi maintains that the naira is undervalued. Economic modeling supports this assertion, according to Shonubi. One of the reasons for the poor performance of the naira against the dollar is the redirection of diaspora remittances away from the formal foreign exchange market. Shonubi also accuses unnamed Nigerian banks of participating in “illegal” dollar sales, resulting in the naira’s depreciation. The CBN plans to crack down on these banks in the near future. The IMF has blamed the naira’s woes on Nigeria’s loose fiscal and monetary policies, suggesting that the country tighten its policies to improve the situation.
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