The Central Bank of Nigeria (CBN) said the non-disbursement of dollars to foreign exchange reserves by the Nigeria National Petroleum Corporation (NNPC) was responsible for the free fall of the naira in the official and parallel markets.
The Nigerian currency is currently trading at 705 naira to the dollar in the parallel market and 415.96 naira to the dollar in the official market.
The apex bank gave it in a report released on Thursday.
In the CBN report titled: “The Forex Issue in Nigeria: Fact Sheet”, the apex bank revealed that “domestically, the NNPC has not contributed any dollars to the country’s foreign exchange reserve, insisting that the CBN does not print dollars.
The report states, “As noted by CBN Governor Godwin Emefiele, monetary policy alone cannot bear the full burden of the expected adjustments needed to manage these challenges. It is our collective duty as Nigerians to shore up the value of the naira.
According to the apex bank, Nigeria earns foreign exchange from four sources – proceeds from oil exports; non-oil export earnings; diaspora remittances and foreign direct/portfolio investment (capital flows).
NNPC and its subsidiaries are the sole managers of crude oil, which accounts for more than 80% of Nigeria’s foreign exchange (forex) revenues.
On Tuesday, an abbreviated statement from the Federation Accounts Allocation Committee (FAAC) showed that the Excess Gross Account (ECA) fell from $35.377 million in May to $376,655.09.
The ECA is meant to be a savings buffer to stabilize government revenues and serve as a bailout for the economy in difficult times.
The abridged version of the FAAC statement was released after the FAAC monthly meeting in Abuja by the Director of Information at the Office of the Accountant General of the Federation (OAGF), Henshaw Ogubike.
The bank noted that the past six years have been characterized by two recessions triggered by a slowing global economy as well as the effects of COVID-19.
These, he said, were further exacerbated by the sharp decline in crude oil prices, Nigeria’s main source of foreign exchange.
The bank said: “Given Nigeria’s heavy dependence on oil exports for foreign exchange earnings and government revenue, the impact of the oil crash has severely affected the naira revenue of government and government. other macroeconomic aggregates, including economic growth.As a result, the exchange rate between the naira and other currencies has widened over the past few years.
On key economic facts, the apex bank said that the CBN issues legal tender in Nigeria (naira) and does not print foreign currencies. He said the pressure on the naira had both local and global perspectives.
“There is a constant demand for foreign currency for goods and services, thus creating a demand challenge. The current exchange rate of the naira, like other major currencies, is not determined by cryptocurrencies, given the volatility of the cryptocurrency space, which has lost over two trillion over the past the past two years in the face of high inflation,” he said.
High inflation in other climates and rising interest rates have increased pressures on the exchange rate. This triggered capital flow reversals from emerging markets and developing economies (EMDEs) to more advanced economies.
“The United States (US) dollar is appreciating against all major world currencies. The imbroglio in Nigeria’s higher education sector has triggered an exodus of students from Nigerian schools, with the concomitant payment of tuition fees in foreign currency. Summer travel by Nigerians has also impacted demand from the foreign exchange market,” he said.
According to the apex bank, Nigeria is non-producing, so the propensity to import directly affects the value of the naira, but the apex bank has tried to address the challenge through policies.
It lists policies such as RT200 FX scheme, 100 percent policy on production and productivity, Naira4Dollar scheme, Anchor Borrowers (ABP) scheme, Export Development Facility (EDF); and the Non-Oil Export Stimulus Facility (NESF).
The bank said that all these initiatives and many of its other initiatives are aimed at diversifying the economy, boosting production, increasing foreign exchange inflows, keeping the naira stable against other currencies and reducing pressure demand for foreign currency.