The Central Bank of Nigeria (CBN) has failed in its attempt to incentivize the country’s forex market through its so-called “Naira for Dollar” scheme. This is evidenced by the fact that the local currency has plunged by more than 25% since the launch of the incentive scheme in March 2021.
Naira Falls
The CBN’s plan to encourage recipients of cross-border remittances to cash them through formal channels has failed to stimulate the foreign exchange market and, therefore, has not achieved the bank’s goal of stopping the fall of the naira, the report said .
According to one reporton a local news site, Blueprint, the naira’s exchange rate against the US dollar has fallen by over 25% since the launch of the naira-for-dollar scheme over 13 months ago. At the time of writing, the exchange rate of the naira to the dollar in the parallel market is 612 naira to the dollar. The official exchange rate has been at 415 naira to the dollar.
As Bitcoin.com News previously reported, the CBN launched the incentive scheme more than a month after it instructed financial institutions to block crypto entities from the banking ecosystem.
At the time, the CBN’s goal was to attract Nigerians in the diaspora who were reportedly sending remittances through alternative channels that used black market exchange rates. By directing cross-border remittances to formal channels, the CBN could increase the amount of foreign currency in its coffers. And the increased foreign exchange reserves would support the naira; in March, a central bank economistdeclared the scheme a success, having achieved its objective
Indirect devaluation of the naira
Nevertheless, some unnamed intellectuals cited in the report argue that the scheme alone cannot eliminate pricing anomalies caused by inconsistent policies. Some experts and organizations even view the incentive program as a devaluation of the naira. Cowry Asset Management, for example, noted in Blueprint that the scheme may have sent the wrong signal to the market.
{But the CBN’s Naira Fodder scheme appears to be another form of naira depreciation that may have sent the wrong signal to the forex market,” the asset management firm said.
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