Nigeria’s local currency, the Naira suffered its second depreciation against the Dollar in 2021 as it once again weakened at the black market, closing at N475/$1 representing a N3 drop when compared to the N472/$1 it closed on January 8, the last trading day for the previous week.
This is the second time the Naira will depreciate this year after it had traded at N470/$1 for almost two weeks since December 29, 2020.
The pressure experienced at the black market, according to market experts, can be attributed to a surge in demand as holiday makers’ source for forex to return to their bases abroad.
Demand for forex by parents of Nigerian students who school abroad have also increased as they rush to fund their tuition and allowances, and this is likely to sustain the pressure at the black market which has been a major source for price discovery for the foreign exchange market.
At the NAFEX (I&E Window) where forex is traded officially, the exchange rate closed at N393.33/$1, a slight appreciation from the N393.50 recorded on January 8.
The drop in Dollar supply is occurring at the same time there was a price increase on Monday, sustaining the previous trading day’s increase. The exchange rate at the I&E window has held steady despite the major depreciation on the last day of trading in 2020 when it closed at N410/$1.
The exchange rate disparity between the parallel market and the official market also widened again to N81.67, representing a 17.2% devaluation differential.
The opening indicative rate was N393.69 to a dollar on Monday, representing a 20 kobo loss when compared to the N393.49 that was recorded on Friday, January 8.
The N411 to a Dollar was the highest rate during intra-day trading before it still closed at N393.33 to a dollar, while also selling for as low as N350.27/$1 during intra-day trading.
Forex turnover dropped from $65.63 million on Friday, to $61.73 million on Monday, while the average daily forex sale for last week was about $169.93 million, which represents a huge increase from the $34.5 million that was recorded the previous week.