The Naira has crashed to its lowest value against the dollar.
The Nigerian Naira has crashed to an all-time low against the US dollar and is currently trading at ₦420.67 at the official window after opening yesterday at ₦414.02.
The official Investors and Exporters (I & E) window exchange rate between the naira and the US dollar closed at N435/$1, the highest rate on record.
The Naira crashed against the US dollar on Friday, opening at 414.02/$ and closing at N435/$1, representing a 4.82% depreciation compared to the N415/$1 recorded in the Wednesday trading session.
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The 4.82% fall is the highest movement in either direction in over a year. The last time there was such a movement in the official market was on October 31st, 2021, when the rate depreciated 4.12% to close at N410.25.
On the black market, the Naira also crashed against the US dollar on Thursday, opening at 565.02/$ and closing at N570.
In 2021, the Investors and Exporters Window (I&E), where forex is officially sold, recorded a transaction value of $32.3 billion in forex turnover.
This is according to data on the FMDQOTC compiled daily by Ejes Gist News. Over the last two years. The total amount bought and sold at the official forex market in Africa’s largest economy is represented by forex turnover at the FMDQOTC.
Since Covid-19 triggered a drop in oil prices and ensured an outflow of forex from financial markets, the Nigerian economy has faced forex shortages.
Reflection on Dollar and Naira
Foreign direct investment into the country has also fallen to multi-year lows, with $2.7 billion in the first half of 2021 compared to $7.1 billion in the same period of 2020.
Nigeria only received $5.3 billion in capital inflows between July 2020 and June 2021 (a year), compared to over $16.3 billion in the corresponding period ending June 2020.
While this reflects the economic impact of Covid-19, critics point the finger at central bank policies that have harmed foreign investor confidence.
Last year, the central bank also barred BDC operators from the foreign exchange markets, reducing dollar suppliers to retail investors. Nonetheless, this did not stop a wild black market from depreciating to as high as N580/$1 at one point this year.
Official Dollar to Naira FX Rates Under Control
Throughout the year, the central bank kept a tight grip on forex prices, flexing its muscles as the market’s largest forex supplier. Here are some figures:
On the 7th of December, the dollar was exchanged for N463.1 at the I&E window, which was the highest rate ever.
FX rates closed at N415.07/$ on the same day. On the 11th of January 2021, the lowest exchange rate recorded at the I&E window was N350.27. On the same day, the rates settled at N393.33/$1.
Finally, the exchange rate closed at N435/$1 on the last day of the year. On the last day of the year, the highest and lowest rates traded were N445.6/$ and N400/$1, respectively.
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In terms of forex turnover, the highest daily trade of the year occurred on September 1, 2021, when $486.31 million in FX was transacted.
At the official NAFEX market, the CBN is expected to maintain its price control policy.
This indicates that the gap between official and black market rates is still wide, at over N130/$1.
The attempt by the CBN to unify the exchange rate was not successful. Last year, however, came the closest to unification, especially after the CBN adopted NAFEX as its official rate.