In what has become a trend, Naira fell to a record low over-the-counter on the last trading day of 2021, closing at N435/$. This came amid uncertainty about the market outlook as the economy wobbles into a new year.
With the closure rate, naira had sold at a discount of over 15 per cent to a dollar at the official Nigerian Autonomous Foreign Exchange (NAFEX) window last year.
Trading opened last year at N410/$ but the exchange rate fell to about N415/$ as the year rolled by, though it also traded at N415/$ after the Christmas holidays, with extremely wide swings, indicating high volatility of the market.
Last Friday, the Naira started trading on an upswing at N420.67/$ but slid to as low as N445.60/$ by mid-day before it appreciated slightly to close at N435/$. The extremely unpredictable trading session saw the currency vacillating between N400/$ and N445.60/$.
The forward market, which measures the perception about the near-to-medium-term outlook of the Naira moved on a much narrower range of between N452.12/$ and N453.12/$.
Naira, however, has been relatively stable at the parallel market, closing the year at N565/$. As at yesterday, the market still traded around N465/$, suggesting the narrowing of the historic wide differential between the official and black market rates. Some experts have attributed the many manipulations (including round-tripping) in the market to the wide gap between the windows.
The dollar traded for about N475/$ in the early days of last year and hit N575/$ at the height of last year’s currency crisis few months ago. There was a breather weeks ago, with the unofficial exchange rate adjusting to N550/$.
Like it has every year since 2014, the Naira finished 2021 weaker than it started. It lost about N90 per dollar or 19 per cent at the highly speculative parallel and six per cent or N25.7 per dollar at the official trading window.
About two years ago, the Central Bank of Nigeria (CBN) had pledged its commitment to rally convergence around NAFEX. Last year, it replaced the default CBN official rate, the benchmark used for government transactions, with NAFEX, but a full rate harmonisation has not been attained.
Yesterday, the Chief Executive Officer of Economic Associates, Dr. Ayo Teriba, said nothing short of “a single exchange rate implementation would help to clear the market and restore equilibrium.”
