The naira has dropped in value, and now Nigeria Customs Service (NCS) uses an exchange rate of N1601.84 per $1 for import duties.
On Friday, July 26, 2024, the naira traded at N1,609 per $1, the lowest in four months, according to FMDQ exchange data.
This drop hurts the efforts of the Central Bank of Nigeria (CBN) to make the naira stronger by increasing the monetary policy rate (MPR).
The naira hasn’t been this low since March 14, 2024, when it was N1608.98 per $1. Just three days earlier, the naira had shown strong gains against the dollar, making this a volatile time for foreign exchange.
Selling Dollars to Bureaus De Change (BDCs)
To help with the dollar shortage, the CBN has been selling foreign exchange (FX) to authorized currency exchange operators, known as Bureaus De Change (BDCs), recently.
The CBN allocated $148 million to 29 authorized dealers to stabilize the market after the naira’s drop. These trades happened on July 22 and 23, 2024, with exchange rates between N1,470.00 and N1,510.00 per $1.
Two weeks earlier, the CBN sold $122.67 million to 46 parties to reduce market fluctuation and increase liquidity. They also increased borrowing costs by 500 basis points and reduced the return on deposits by 100 basis points to control naira liquidity.
Nigerian Government’s Plan to Issue USD Bonds
The Ministry of Finance plans to issue bonds worth $500 million in U.S. dollars. This aims to attract investments from Nigerians living abroad and those with foreign currency savings in Nigeria.
However, the International Monetary Fund (IMF) warned that this could increase pressure on the naira and make naira bonds more expensive. The IMF also noted that issuing dollar bonds locally could make the market more fragmented.