Naira declines at NAFEX window despite 56.6% increase in dollar supply

The Naira depreciated against the dollar at the Investors and Exporters (I&E) window on Wednesday, closing at N394.50/$1.

On January 6, 2020, the exchange rate between the naira and dollar closed at N394.50/$1, the third trading day of 2021 at the Investors and Exporters’ (NAFEX) window where forex is traded officially.

This is a depreciation from the N393.83 recorded on the previous trading day, January 5, 2021.

The improved dollar supply could not stop the rise in prices on Wednesday after the gain recorded in the last 2 trading days.

We also reported last week that the latest round of adjustment at the I&E window is temporary as the rates could fall back below N400/$1.

However, at the black market where forex traded unofficially, the exchange rate continued to remain stable at N470/$1 on Wednesday, January 6, 2021. The exchange rate at the parallel market closed at N470/$1 on the previous trading day January 5, 2021.  It has been trading at N470/$1 since the 29th of December 2020.

The exchange rate disparity between the parallel market and the official market widened again to N75.5, representing a 16% devaluation differential.


The Naira depreciated against the dollar at the Investors and Exporters (I&E) window on Wednesday, closing at N394.50/$1 as against N393.83 reported on January 5, 2021.

  • This represents a 67 kobo drop when compared with that of the previous trading day.
  • The opening indicative rate was N396.30 to a dollar on Wednesday. This represents a N2.33 drop when compared to the N394.63 that was recorded on Tuesday, January 5, 2021.
  • The N413.05 to a dollar was the highest rate during intra-day trading before, it still closed at N394.50 to a dollar. It also sold for as low as N388/$1 during intra-day trading.
  • Forex turnover: Forex turnover at the Investor and Exporters (I&E) window rose by 56.6% on Tuesday, January 5, 2021.
  • Forex turnover rose from $33.51 million on Tuesday, January 5, 2021, to $52.50 million on Wednesday, January 6, 2021.
  • 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.
  • The exchange rate is still being affected by low oil prices, dollar scarcity, a backlog of forex demand, and a shaky economy that has been hit by the coronavirus pandemic.

Can the naira sustain below N400?

Last Thursday, December 31, 2020, the central bank allowed the exchange rate to depreciate to N410.25 as a late demand surge forced prices higher.

Even though the highest price for the day was N413.05, the market still closed lower at N394.50 as the trend from the previous trading day continued, blowing any initial belief that a devaluation had occurred last week.

Devaluation supporters who had expected this to be a nudge towards “market reality” will be surprised by the appreciation recorded on Monday, suggesting that the central bank will continue with the defence of the local currency in the new year. On the flip side, policy supporters will cite this as the effect of market forces.

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