Naira devaluation drives Nigeria’s export to N42trn
The value of Nigeria’s export may rise to at least N41.99 trillion per year following the Central Bank of Nigeria (CBN) float of the naira.
The apex bank had last Wednesday directed Deposit Money Banks to remove the rate cap on the naira at the official Investors and Exporters’ Window of the foreign exchange market, to bridge the gap between the official and parallel market rates of the naira.
It said, “The Central Bank of Nigeria wishes to inform all authorised dealers and the general public of the following immediate changes to operations in the Nigerian Foreign Exchange Market: Abolishment of segmentation. All segments are now collapsed into the Investors and Exporters window.”
Following the move, the naira fell from its 471/$ to 664.04/$ and closed the week later at N663.04/$.
The weakening of the naira against the dollar means exporters, especially the Federal Government, will make more revenue (in naira terms) from exports’ dollar proceeds.
According to the International Trade Center, Nigeria’s total export in 2022 was $63.34 billion. At N448.55/dollar (the central price of the dollar as of December 30, 2022, on the CBN’s website), its naira equivalent was N28.41 trillion. But now (using Friday’s rate of N663.04/dollar), its naira equivalent would translate to N41.99 trillion.
If Nigeria exports the same quantity it did in 2022, it will make about N41.99 trillion. And with the government’s plan to ramp up oil production, which is a major component of the country’s export, Nigeria’s export value is expected to increase.
Data from the multilateral agency, which has a joint mandate with the World Trade Organisation (WTO) and the United Nations (UN), which gets its data from the National Bureau of Statistics (NBS) and the United Nations COMTRADE, showed that Nigeria made N25.78 trillion ($57.47 billion) from its largest exported commodity, oil and mineral fuel. This was despite a slump in oil production due to pipeline vandalism and crude oil theft.
In January, the Group Chief Executive Officer, Nigerian National Petroleum Company Limited, Mele Kyari, stated that the country could achieve 2.2mb/d of crude oil production in 2023.
The CBN’s move came after President Bola Tinubu made a call for the unification of exchange rates during his May 29 inauguration speech.
He said, “The central bank must work towards a unified exchange rate. They should direct the fund from arbitrage to meaningful investment.”
The latest CBN move is expected to increase the government’s revenue, which has been on a free fall for a while.
In a statement supporting the policy, JP Morgan, said, “Of course, a weaker exchange rate means the government would receive higher naira revenues from oil and gas exports.”
According to the Director-General of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture, Olusola Obadimu, exporters will now be getting the real value of their exported commodity due to the unification of exchange rates.
