Naira plummets as Nigeria floats currency for 1st time

Naira plummets as Nigeria floats currency for 1st time

Nigeria’s naira plummeted Monday, losing more than a third of its value as the government floated the currency for the first time in the history of the oil-producing nation.

The move was forced by a spiraling economic crisis and massive shortage of foreign exchange created by slumped oil prices and aggravated by President Muhammadu Buhari’s 16-month-long insistence that the Central Bank defend the naira at a fixed rate of 197 to the dollar.

Banks were selling dollars at 270 to the dollar Monday morning.

The Central Bank’s website still posted the old rate of 197 with inflation of 15.68 percent that analysts say will get worse before it slows down.

The naira had crashed to 370 to the dollar on the parallel market before last Wednesday’s announcement that market forces will prevail amid a backlog of demand estimated at $4 billion by Nigerian economic analyst SBM Intelligence.

Private foreign exchange dealers stopped trading as lenders began bidding at banks to set a rate to be decided by demand with no initial intervention, Central Bank officials promised.

The parallel market rate dropped to between 315 and 330 to the dollar.

“This is good news for the majority of Nigerians,” Ayo Teriba, CEO of Economic Associates consultancy, said of the devaluation. “The biggest gain is on the appreciation of the parallel market because the parallel market devaluation has destroyed domestic activities, with prices of local goods sky-rocketing.” Imported goods also have doubled and trebled in price.

The new policy would halt speculation by some of the favored few who had access to “cheap” dollars, he said.

“We are optimistic that the days where the majority of Nigerians suffer for the benefit of a few as a result of monetary policy are nearing their end,” said SBM Intelligence