New Telegraph

Rewane: Exchange rate adjustment inevitable in 2023

Citing what he said was the negative effect of the wide gap of the foreign exchange premium, currently existing between the parallel and official market rates on Nigeria’s economy, the Chief Executive Officer, Financial Derivatives Company (FDC) Limited, Mr. Bismarck Rewane, has said that an official adjustment of the exchange rate is unavoidable next year.

The FDC CEO, who made the prediction in his December 2022 Lagos Business School (LBS) Ex-ecutive Breakfast Session presentation, stated that administrative controls in the country’s foreign exchange market are responsible for the huge parallel market premium, adding that the situation is “leading to diversion of investment flows away from the market.” According to him, the sharp drop in capital inflows to $3.1billion as of H1’22 from $24.0billion in FY’2019 as well as diaspora remittances falling to $10.1billion in H1’22 from $23.8billion in FY’19, resulted in Nigeria’s external reserves plunging to $36.96bilion in December 2022 from its all-time high of $62.08bn in 2008.

According to him, “the more the administrative controls in the forex market, the more the parallel market premium increases leading to diversion of investment flows away from the market. In 2023, exchange rate adjustment is inevitable.” With the naira currently trading at N740 per dollar at the parallel market and at N447/$1 at the official market, it means that the parallel market premium is N293. In a recent chat with journalists, President of the Association of Bureau de Change Operators of Nigeria (ABCON), Aminu Gwadabe, attributed the huge parallel market premium to the Central Bank of Nigeria’s (CBN) unorthodox policies.

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