The Central Bank of Nigeria, last week devalued the Naira to freely float against the dollar and other global currencies. The announcement came shortly after President Bola Tinubu pledged to unify the country’s multiple exchange rates.
The devaluation has met mixed feelings among Nigerians, as it impacted the Parallel Market Rate which was around N450 to a dollar before the announcement was made and reached over N700 to a dollar during trading on the I&E window last Wednesday, after the announcement.
Some Nigerians have raised concerns over the availability of dollars for Personal Travel Allowance (PTA) and Business Travel Allowance (BTA) for health tourism, international school fees, etc. Similarly, users of fintech apps have raised questions over what the exchange rates on their apps will be after this directive, and for investment apps, whether their investments will lose value. In a detailed memo to its users, investment platform, Rise, said users investments retain their value in dollars.
The company said, “without being carelessly speculative, the unification of the exchange rate is simply the CBN recognizing the market reality.” Assuring customers that it would keep an eye on the long-term trends in the naira and dollar rate, Rise also said it would add more Naira investment options to its portfolio.
On the possibility of existing investments being affected as a result of the naira devaluation, Rise explained that inflation in Nigeria is currently at 22%, which is very high compared to the 4% inflation rate in the United States. This means that the value of the Naira is still decreasing and at a much faster rate than the value of the US dollar.
“The production of oil in Nigeria is still significantly lower than 2 million barrels per day. As a result, the Central Bank of Nigeria (CBN) has limited ability to provide enough dollars to meet the demand in the market,” Rise added.
