The Naira has depreciated more than 40% since January 2023
The World Bank reports that since the start of 2023, the value of the naira, the currency of Nigeria, has decreased by around 40%. The devaluation is not just happening in Nigeria. The currencies of other African nations experienced a slight depreciation as well.
According to the World Bank, Nigeria (40%), South Sudan (33%), Burundi (27%), the Democratic Republic of the Congo (18%), and Kenya (16%) are the top five currencies with the worst performance. Nigeria has two exchange rates in operation: the official rate and the black market rate. The official rate was depreciated by 40%.
The parallel rate was $1 for every N747, while the official exchange was $1 for every N450 as of January 2023 and stabilized at $1 for every N462 on May 31, 2023. This implies that there was a 62 percent exchange rate premium. The significant discrepancy between the official and parallel rates deters exports and has a number of negative effects on the nation’s capacity to draw in foreign capital. The official rate depreciated by 40% since January and moved in close proximity to the parallel rate in July as a result of the government’s efforts to unify the exchange rate.
Despite the good intentions behind the unification attempts, the parallel rate continues to persist due to the backlog of foreign currency demand. According to some estimations, it is worth $6.5 billion. This means that as of October 13, the difference between the official and parallel rates is once again 37%. The CBN removed the prohibition on 43 products that were prohibited from using the official exchange rate on Friday, October 13, 2023.
Despite the good intentions behind the unification attempts, the parallel rate continues to persist due to the backlog of foreign currency demand. According to some estimations, it is worth $6.5 billion. This means that as of October 13, the difference between the official and parallel rates is once again 37%. The CBN removed the prohibition on 43 products that were prohibited from using the official exchange rate on Friday, October 13, 2023.
