The Nigerian currency reportedly plunged to a new low versus the U.S. dollar on the official market on Jan.25. Central Bank governor Olayemi Cardoso has said the naira is currently "undervalued" and that efforts are underway to rectify this.
Naira Hits New Record Low Against the US Dollar
The beleaguered Nigerian currency has plunged to a new low against the U.S. dollar on the official market, briefly falling to NGN1,398 per greenback on Jan. 25. According to a Reuters report, the naira's new official record low saw it nearly converge with the parallel market exchange rate, which stood at NGN1,400:USD1.
A Continuation of Depreciation
This latest depreciation of the naira is a continuation of a descent that seemingly began immediately after Bola Tinubu succeeded Muhammadu Buhari as Nigeria's president and removed former Central Bank of Nigeria (CBN) Governor Godwin Emefiele. Before that, the Nigerian central bank had kept the naira's exchange rate versus the dollar fixed at just under NGN500:USD1.
Shrinking Value due to Foreign Exchange Shortages
Following the appointment of the new CBN leadership, the naira has steadily depreciated against major currencies on both the official and unofficial markets. Many Nigerian economy experts agree that the ongoing slide of the naira is mainly due to shortages of foreign exchange.
The Naira is Undervalued, says CBN Governor
However, the current CBN governor, Olayemi Cardoso, recently told delegates attending the launch of an economic outlook report that the naira is in fact "undervalued" and efforts are now underway to help it realize its true value.
"We believe that the naira is currently undervalued and, coupled with coordinated measures on the fiscal side, we will expedite genuine price discovery in the near term. This coordinated approach will contribute to a more balanced and stable exchange rate," Cardoso reportedly said.
CBN Initiates Measures to Ensure Return of Foreign Exchange Inflows
According to a report in the Leadership, the Central Bank of Nigeria (CBN) is planning to take several steps to ensure that all foreign exchange inflows are returned to the central bank.
CBN Governor Aims for Consistent and Stable Exchange Rate
Meanwhile, Cardoso said he is hoping that some of the reforms being undertaken by the CBN will result in a consistent and stable exchange rate. Such an exchange rate will boost investor confidence and make Nigeria an appealing foreign direct investment destination.
Share Your Thoughts
Do you agree with the CBN governor's comments about the naira's value? Let us know what you think in the comments section below.
Frequently Asked Questions
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Is buying gold a good retirement plan?
Although gold investment may not seem appealing at first glance due to the high average global gold consumption, it's worth considering.
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If you don’t have the funds to invest in safe places, such as a safe deposit box or mining equipment companies, buying shares of these companies might be a better investment. If you need cash flow to finance your investment, then gold stocks could be a good option.
ETFs are an exchange-traded investment that allows you to gain exposure to the market for gold. You hold gold-related securities and not actual gold. These ETFs may include stocks that are owned by gold miners or precious metals refining companies as well as commodity trading firms.
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You might want to buy more gold if you intend to keep your gold IRA for a long time. One ounce doesn't suffice to cover all your needs. You could need several ounces depending on what you plan to do with your gold.
You don’t necessarily need a lot if you’re looking to sell your gold. Even a single ounce can suffice. But, those funds will not allow you to buy anything.
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The price of gold fluctuates based on supply and demand. It is also affected by interest rates.
Due to the limited supply of gold, prices for gold are highly volatile. You must also store physical gold somewhere to avoid the risk of it becoming stale.
Are gold investments a good idea for an IRA?
Any person looking to save money is well-served by gold. It can be used to diversify your portfolio. But gold has more to it than meets the eyes.
It's been used as a form of payment throughout history. It's sometimes called “the world's oldest money”.
Gold, unlike other paper currencies created by governments is mined directly from the earth. That makes it very valuable because it's rare and hard to create.
Gold prices fluctuate based on demand and supply. If the economy is strong, people will spend more money which means less people can mine gold. This results in gold prices rising.
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This is why gold investment makes sense for both individuals and businesses. If you make an investment in gold, you can reap the economic benefits whenever the economy is growing.
Your investments will also generate interest, which can help you increase your wealth. Additionally, you won't lose cash if the gold price falls.
What is a gold IRA account?
People who wish to invest in precious metals can use Gold Ira accounts as a tax-free investment vehicle.
You can purchase gold bullion coins in physical form at any moment. You don’t have to wait to begin investing in gold.
The beauty of owning gold as an IRA is you can hold on to it forever. Your gold holdings will not be subject to tax when you are gone.
Your heirs can inherit your gold and avoid capital gains taxes. And because your gold remains outside of the estate, you aren't required to include it in your final estate report.
To open a Gold IRA, you'll need to first set up an Individual Retirement Account (IRA). Once you've completed this step, an IRA administrator will be appointed to your account. This company acts as a mediator between you, the IRS.
Your gold IRA custody will take care of the paperwork and send the forms to IRS. This includes filing annual reporting.
Once you've set up your gold IRA, it's possible to buy gold bullion. The minimum deposit is $1,000. A higher interest rate will be offered if you invest more.
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You should avoid taking out more than 50% of your total IRA assets yearly. If you do, you could face severe financial consequences.
How is gold taxed within a Roth IRA
The tax on an investment account is based on its current value, not what you originally paid. If you invest $1,000 in mutual funds or stocks and then later sell them, all gains are subjected to taxes.
If you place the money in a traditional IRA, 401(k), or other retirement plan, there is no tax when you take it out. Capital gains and dividends earn you no tax. This applies only to investments made for longer than one-year.
Each state has its own rules regarding these accounts. Maryland requires that you withdraw funds within 60 business days after reaching the age of 59 1/2. Massachusetts allows you to delay withdrawals until April 1. New York has a maximum age limit of 70 1/2. To avoid penalty fees, it is important to plan and take distributions in time to pay all your retirement savings.
Statistics
- If you take distributions before hitting 59.5, you'll owe a 10% penalty on the amount withdrawn. (lendedu.com)
- This is a 15% margin that has shown no stable direction of growth but fluctuates seemingly at random. (smartasset.com)
- You can only purchase gold bars at least 99.5% purity. (forbes.com)
- The price of gold jumped 131 percent from late 2007 to September 2011, when it hit a high of $1,921 an ounce, according to the World Gold Council. (aarp.org)
- If you accidentally make an improper transaction, the IRS will disallow it and count it as a withdrawal, so you would owe income tax on the item's value and, if you are younger than 59 ½, an additional 10% early withdrawal penalty. (forbes.com)
External Links
investopedia.com
forbes.com
- Gold IRA: Add some sparkle to your retirement nest egg
- Understanding China's Evergrande Crisis – Forbes Advisor
finance.yahoo.com
irs.gov
How To
The growing trend of gold IRAs
Investors are increasingly turning to gold IRAs as a way to diversify and protect their portfolios from inflation.
Owners of the gold IRA can use it to invest in physical bars and bullion gold. It can be used for tax-free growth and provides an alternative investment option for those concerned about stocks and bonds.
A gold IRA allows investors to manage their assets without worrying about market volatility. Investors can use the gold IRA for protection against inflation and potential problems.
Physical gold is also a great investment option, as it has unique properties like durability, portability, divisibility, and portability.
Additionally, the gold IRA has many benefits. It allows you to quickly transfer your gold ownership to your heirs. The IRS doesn't consider gold a commodity or currency.
Investors who seek financial stability and a safe haven are finding the gold IRA increasingly attractive.
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By: Terence Zimwara
Title: The Nigerian Naira Hits Record Low Against the US Dollar: CBN Governor Aims to Rectify the Situation
Sourced From: news.bitcoin.com/nigerian-currency-plunges-to-new-low-versus-the-usd-central-bank-governor-says-naira-is-undervalued/
Published Date: Sun, 28 Jan 2024 06:30:32 +0000
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