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Will the Naira Ever Return to its Former Glory?

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By Lukman Otunuga, Senior Research Analyst at FXTM

There was a time when the Naira was worth almost twice as much as the Dollar and equivalent to the British Pound.

Almost three decades later, the local currency is valued at N407 per Dollar and N559 per Pound on the spot rate, N380 per Dollar on the official CBN website. It does not end here. On the black market, the Naira is trading at a paltry N482 per Dollar and as low as N678 to the Pound. Over the past few years, the story defining the Naira’s fall from glory has revolved around multiple exchanges, contradicting statements from officials, Oil prices, shaky economic fundamentals, Dollar scarcity, and pegged exchanges.

Chart Bloomberg Naira spot

Many major institutions have urged Nigeria to unify the multiple exchanges in an effort to promote transparency. The whole drama behind multiple exchanges was triggered by the crude oil crash in 2014 that saw the commodity tumbled almost 50%. Given how more than 90% of foreign-exchange earnings are from oil revenues, the heavy selloff in oil prices exposed Nigeria’s economy to downside shocks.

Rather than devalue the Naira in 2017, the central bank decided to enforce multiple rates for different transactions. There is one rate for government transactions, one rate for investors and exports, another for travellers and SME’s. Indeed, the intention behind this was to improve liquidity and boost Dollar inflows. However, looking at the Naira’s valuation today, ongoing issues with Dollar scarcity and untamed inflation – this move may have done more harm than good.

2020 was an incredibly challenging year for Africa’s largest economy. Although the economy expanded by 0.11% during the final quarter of 2020, full-year growth contracted by 1.92%. As oil revenues evaporated, the Nigerian Naira was devalued twice. Indeed, a weaker Naira would boost government revenue from oil exports – an encouraging development for the economy. If the Naira depreciates, this could boost revenues from crude oil which is sold in Dollar but converted in Naira. Despite the weakening of the spot and black-market rate, the central bank of Nigeria has left the Naira pegged to N380 on its official website.

For the Naira to return to its former glory, could a free-floating currency be the solution? Vice President Yemi Osinbajo said the government is committed to adopting a flexible exchange rate. While an artificially strong exchange could benefit Nigeria based on the fact that most products are imported, the negative impacts outweigh the positive. This continues to be reflected in the Naira’s valuation and health of the economy. When considering how a hefty chunk of foreign exchange reserves is acquired from oil sales, falling oil prices could complicate the Central Bank of Nigeria’s effort to defend the Naira.

Nigeria continues to face pressure from major institutions to reform its foreign exchange policy with confusion around the country’s multiple exchange rates haunting investor attraction. The question is whether Nigeria will be able to handle the aftermath from a free-floating Naira? The country spends roughly 70% of its revenue servicing public debt. A devaluation of the Naira could mean higher interest rate costs on the Dollar element of Nigeria’s debt will jump in naira terms. The price of electricity and gasoline may be impacted, something that will hit consumers and ultimately impact the economy.

If the natural forces of supply and demand are allowed the determine the equilibrium value of the official Naira exchange rate, this could result in a steep depreciation of the local currency. The rates in the black-market exchange are a testament to this. Such a development could turbocharge inflationary pressures and prompt the Central Bank of Nigeria to tighten monetary policy.

The idea of a unified exchange rate could bolster Nigeria’s economic outlook, offer transparency and rekindle investor attraction towards the country’s assets. But it remains unknown if or when the Naira could return to its former glory, especially when factoring in the domestic economic conditions at home and across the globe.

 

 


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General News

NIMC Sets 48-hour Deadline for Diaspora Partners to Activate New Licences

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The National Identity Management Commission (NIMC) has given its Diaspora Front-End Partners (FEPs) 48 hours to obtain and activate their National Identification Number (NIN) enrolment licences on its newly upgraded diaspora enrolment platform.

The commission said the deadline followed the successful completion of a major upgrade aimed at improving the security, efficiency and reliability of NIN registration for Nigerians living abroad.

According to NIMC, the upgraded platform will offer a more seamless and robust service to diaspora applicants, ensuring faster processing and better data protection. To prepare for the transition, all FEPs have been onboarded onto the new system and taken through intensive training to equip them with the knowledge needed for effective management of the platform.

Once compliant partners activate their licences, Nigerians abroad will be able to access NIN enrolment services through them without disruption.

“The Commission apologises for any inconvenience the upgrade process might have caused and has set up a dedicated service team to resolve all issues related to diaspora enrolment,” NIMC said in a statement signed by Dr. Kayode Adegoke, its head of corporate communications.

Diaspora applicants experiencing difficulties have been advised to contact the commission for prompt assistance.

While the new system rolls out overseas, NIN enrolment continues across all centres in Nigeria, with applicants able to locate their nearest centres on the NIMC website. Nigerians at home or abroad can also modify their NIN data via the online self-service portal.

NIMC further encouraged NIN holders to download the NIMC NINAuth App on iOS or Google Play to instantly verify their NIN, control who can access their information, and enjoy secure authentication services.

 


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Kuwait Busts Nigerian Cybercrime Ring Targeting Telecom Tower, Banks

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Kuwait’s Criminal Security Sector has dismantled an international cybercrime ring composed of Nigerians responsible for coordinated attacks on telecommunications towers and banks, the Ministry of Interior announced on Sunday.

Kuwait Busts Nigerian Cybercrime Ring Targeting Telecom Tower, Banks

According to Arabic-language daily Al Qabas, the case was initiated after the Communication and Information Technology Regulatory Authority reported cyber intrusions targeting local telecom networks.

Specialised security teams quickly launched an investigation, discovering that the suspects used advanced electronic devices to breach networks and distribute mass phishing messages impersonating banks, aiming to steal account information and siphon funds.

Signal-tracking technology led investigators to a vehicle in the Salmiya area.

When authorities attempted to stop the vehicle, the driver tried to flee, colliding with several cars before being apprehended following a fierce struggle.

A search of the vehicle uncovered sophisticated electronic equipment and various technical tools.

Upon investigation, the suspect confessed to collaborating with an accomplice to hack telecom networks and send fraudulent messages posing as banks and telecommunications companies.

Police subsequently located and arrested the second suspect, and a search of their residence uncovered additional devices used to analyse the stolen data.

Both suspects, along with the seized equipment, have been handed over to the relevant authorities for prosecution.

The Ministry of Interior reaffirmed its commitment to protecting the nation’s cybersecurity and intensifying efforts to combat electronic fraud targeting both citizens and residents.


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Nigerian Scientists Await Return of Egusi Seeds Sent to Space

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Space in Africa, the Lagos-based firm Oniosun founded, is expecting its Egusi melon seeds to splash down in the Pacific Ocean Saturday—fresh from a trip to the International Space Station.

Nigerian Scientists Await Return of Egusi Seeds Sent to Space

Once Earthside, experiments will begin on what is being hailed as the first food native to West Africa to be sent to space.

As Oniosun told AFP on Friday, it could herald an era where space exploration reflects the planet’s diversity.

“When we talk about humans colonizing other planets, this is not just an American mission or a European mission—this is a global mission,” he told AFP.

And future African space explorers might enjoy a taste of home.

Experiments on extraterrestrial food, which is to say tested in space, have been going on for years.

Growing food in space is seen as a crucial part of long-distance space flight and long-term missions, where frequent resupply won’t be feasible.

Scientists at the University of Florida in the United States, and the International Institute of Tropical Agriculture, in the southwestern Nigerian city of Ibadan, will examine the seeds “to see the effects of exposure to space” and zero gravity, including on the seeds’ DNA.

Once planted, researchers will monitor their post-space performance and germination.

The seeds went up to the ISS on a SpaceX flight last week, as part of NASA’s partnership with private firms.

Oniosun said the inclusion of Egusi seeds marked an important step forward, both for those on Earth as well as future astronauts.

High in protein, they are typically used to prepare soups and stews across West and Central Africa.

Africa’s most populous country has a small space industry, but the launch of the seeds seemed to generate more excitement on social media and in newspapers than previous launches of Nigerian satellites, he said.

“The moment that we’re sending food that they love, a food that holds significant cultural contexts to Nigeria… everybody starts getting interested in the subject,” Oniosun told AFP.

“The launch of Egusi melon seeds into space is more than a symbolic gesture,” he added.

“The future of humanity among the stars must reflect the diversity and richness of life on Earth.”

Whether pounded yam—the key dish served alongside Egusi soup—will make its way to the final frontier remains to be seen.

 

 


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