The Nigerian presidency has denied reports that the country’s Vice President (VP), Yemi Osinbajo, was calling for the devaluation of the local currency when he recently questioned the naira’s official exchange rate.
The Huge Arbitrage
In fact, according to a report that quotes Laolu Akande, the VP’s assistant, Osinbajo is against “a willy-nilly devaluation of the naira.” Akande suggests that the media may have taken Osinbajo’s comments out of context. He explained:
For context, the Vice President’s point was that currently, the Naira exchange rate benefits only those who can obtain the dollar at N410, some of whom simply turn round and sell to the parallel market at N570.
As regularly reported by Bitcoin.com News, Nigeria’s official exchange rate has remained unchanged since the Central Bank of Nigeria (CBN) last devalued the naira in May 2021. On the other hand, the exchange rate on the black market has grown steadily, hence the existing arbitrage.
Market-Reflective Exchange Rate Needed
According to Akande, it is this growing gap between the two rates that prompted VP Osinbajo to call for an adjustment.
“It is stopping this huge arbitrage of over N160 per dollar that the Vice President was talking about. Such a massive difference discourages doing proper business, when selling the dollar can bring in 40 per cent profit,” he said.
According to the report, Akande thinks “only a more market reflective exchange rate would ameliorate this.” He suggests that when such a rate is finally adopted, an increase in the supply of dollars is expected to follow, and “the rates will drop and the value of the naira will improve.”
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