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What CBN should do to crash FX rate to N1000 per dollar – Aja

What CBN should do to crash FX rate to N1000 per dollar – Aja

Financial analyst Kalu Aja has urged the Central Bank of Nigeria to set the Naira’s exchange rate at N1000 to the USD. Aja made this recommendation in a statement via his official X handle on Sunday.

This suggestion comes in response to the recent plea from the Association of Bureaux de Change Operators for the apex bank to reconsider the allocation rate of the Dollar. The request arises amidst the ongoing appreciation of the Naira against the Dollar in both foreign and parallel exchange markets, with the exchange rate reaching N1,251 per dollar on Friday.

Aja emphasized that despite this trend, the underlying economic fundamentals remain unchanged, with the country deriving 89% of its foreign exchange earnings from oil.

He proposed that selling dollars at the suggested rate of N1000 would lead to a corresponding drop in market prices, highlighting that such intervention is a standard practice for central banks in floating markets. Aja clarified that the issue lies not in the strategy itself but rather in the cost of implementing it.

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He noted that the CBN has resorted to issuing bonds (FPI) to fund its efforts to stabilize the Naira’s exchange value. However, he pointed out that the alternative approach of using oil export earnings would yield similar results, leading to a strengthened Naira.

Aja emphasized that despite these interventions, the fundamental factors driving the forex market remain unchanged, particularly the decline in oil revenues. He suggested that the CBN’s actions have essentially bought time for the government to increase oil production. However, he cautioned that any significant changes in oil output could alter the forex landscape, potentially alleviating pressure on the Dollar.

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