The controversial foreign exchange management policy of the central bank denied the various tiers of government in Nigeria a staggering $144.1bn between 2017 and the first quarter of last year according to a report by the World Bank.
Nigeria’s central bank’s use of multiple exchange rates “acts as an implicit tax levied by the CBN on federation revenue,” the World Bank said in thereport first published in November.
According to the World Bank, the CBN practice “cost the government $144.1 billion between 2017 and the first quarter of 2021.”
Management of Nigeria’s foreign exchange policy has come under focus as Africa’s largest economy prepares to hold elections in February but the central bank governor has resisted calls by both the World Bank and the International Monetary Fund to close the differential between the rates by allowing more flexibility in the official window.
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Ahead of the forthcoming elections, all of the three leading presidential candidates including the ruling All Progressives Congress nominee Bola Ahmed Tinubu and his rivals, Atiku Abubakar of the People’s Democratic Party and Peter Obi of the Labour Party, have promised to end the controversial multiple exchange rate system if elected
Nigeria has multiple exchange rates for different official transactions, and an unofficial exchange rate at which those who can’t access dollars from the Central Bank of Nigeria get their greenbacks.
The local currency, the Naira is poised for its eighth straight day of losses and on track for its longest losing streak since 2020, less than two months before a presidential election, according to Bloomberg analysis.
The naira traded at 453.16 to the dollar on the official window as of 4:30 p.m. local time on Thursday in the spot market. It has dropped 6.3% this year in the official market, where the rate is tightly controlled by the nation’s central bank.
In the unauthorized parallel market, where the dollar is freely traded, the naira exchanged at 737.92 to the dollar according to @naira.rates. That brings the differential between the official and parallel rate to 63%.
