Naira falls at NAFEX window as external reserves rises to highest level since July 2020

Nigeria’s external reserves rose to the highest level since July 2020.

On January 12, 2021, the exchange rate between the naira and the dollar closed at N394/$1 at the NAFEX (I&E Window) where forex is traded officially, a depreciation from the N393.33 recorded on the previous trading day, January 11, 2021.

However, the exchange rate at the black market where forex traded unofficially remained stable at N475/$1. The exchange rate at the parallel market closed at N475/$1 on the previous trading day of January 11, 2021.

The naira had largely maintained stability since the beginning of the year after only depreciating twice this year. The naira traded at N470/$1 for almost 2 weeks since the 29th of December 2020.

The pressure experienced at the forex market can be attributed to a surge in demand and a relatively low dollar supply.

It is understood that the drop in dollar supply is occurring at the same time there was a price increase on Tuesday, 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 widened again to N81, representing a 17% devaluation differential.


The Naira appreciated against the dollar at the Investors and Exporters (I&E) window on Tuesday, closing at N394/$1 as against N393.33 reported on January 11, 2021.

  • This represents a 67 kobo gain when compared with that of the previous trading day.
  • The opening indicative rate was N396.95 to a dollar on Tuesday. This represents a N3.26 loss, a significant drop, when compared to the N393.69 that was recorded on Monday, January 11, 2021.
  • The N414.90 to a dollar was the highest rate during intra-day trading before, it still closed at N394 to a dollar. It also sold for as low as N390/$1 during intra-day trading.
  • Forex turnover at the Investor and Exporters (I&E) window declined by 41.6% on Monday, January 11, 2021.
  • Forex turnover dropped from $61.73 million on Monday, January 11, 2021, to $36.07 million on Tuesday, January 12, 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.

External Reserves Rise

Nigeria’s gross external reserves rose sharply to $36.1 million according to central bank data dated January 11, 2020.

  • This is the highest level since July 2020 and a sign that higher oil prices and steady output levels may be contributing significantly to Nigeria’s foreign exchange position.
  • However, the external reserve is 5% off the $38.2 billion held as this time last year.
  • Nigeria needs the external reserves to hit $40 billion if it is to adequately meet some of the pent up demand that has piled up since 2020 when oil prices crashed and the pandemic caused major economic lockdowns.
  • Nigeria is close to obtaining a World Bank $1.5 billion facility which will boost external reserves when it is disbursed.
  • It is understood that the central bank might be required to devalue further and relax some of its capital controls if it is to receive the funds from the world bank.

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