An attempt by the Central Bank of Nigeria (CBN) to stimulate the country’s foreign exchange market through the so-called “naira for dollars” scheme has failed. This is evidence of a more than 25% drop in the local currency since the start of the stimulus scheme in March 2021.
A report said that CBN’s scheme which encourages cross-border remittance recipients to withdraw cash through formal channels, has failed to stimulate the forex market and hence has been shown to prevent depreciation of naira. The target of the bank has not been achieved.
According to a report by a local news site, Blueprint, since the introduction of the Naira to Dollar scheme more than 13 months ago, the exchange rate of the Naira versus the US dollar has declined by over 25%. At the time of writing, the naira-to-dollar exchange on the parallel market is 612 naira for every dollar. The official exchange rate remains at 415 naira per dollar.
As previously reported by Bitcoin.com News, CBN launched the incentive scheme more than a month after instructing financial institutions to block crypto entities from the banking ecosystem.
At the time, CBN’s goal was to lure Nigerians into the diaspora who were allegedly sending remittances through alternative channels, which use black market exchange rates. By directing cross-border remittances to official channels, CBN will be able to increase the amount of foreign exchange flowing into its coffers. In return the large foreign exchange reserves will be used to support Naira. In March, a central bank economist announced that the scheme had achieved its objective and was thus a success.
indirect naira devaluation
Nevertheless, some anonymous pundits cited in the report insist that the plan alone cannot undo the pricing discrepancies due to inconsistent policies. Some experts and organizations also see the incentive scheme as a devaluation of Naira. For example, Cowry Asset Management is quoted in the blueprint as commenting on how the scheme sent false signals to the market.
“However, we believe that CBN’s Naira Naira for Dollar scheme appears to be another form of depreciation that may have sent a false signal to the forex market,” the asset management firm said.
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