The Nigerian currency, the Naira traded at a record low against the dollar at the official NAFEX window on Friday.
The naira closed at 411.25 — the last closing rate for the naira, despite hitting N419.75 to a dollar during the intra-trading day.
Having traded within a band of 380 and 381 to the dollar since July last year, the naira hit a record low of 419.75 against the dollar on Friday.
Why is the Naira always depreciating against the Dollar?
Nigeria’s main foreign exchange earnings come from crude oil which account for almost 75% of dollars coming into the country. As importers and foreign investors seek to repatriate funds, it piles pressure on the naira causing the currency to depreciate.
What Effect Does This Have?
The lower rate for the Naira could have a huge effect on the nation’s economy. A strong national currency allows importers more purchasing power, while a weak currency makes it more expensive to import goods. Given how reliant Nigeria is on imports, a weak Naira makes a vast range of products more expensive for the consumer. On the other hand, it becomes cheaper for other countries to purchase goods from Nigeria.
The different trading rates have attracted warnings from the World Bank, who have asked that the rates be unified in order to attract investment.
The Governor of the Abuja based bank, Godwin Emefiele, had in February confirmed that the naira has depreciated at the official market to N410 against the dollar as the government tries to boost earnings from crude sales, Nigeria’s main export.
On Friday, The CBN removed the exchange rate of N379/$1 from its website homepage. The exchange rate displayed on the website was usually the reference point for the official exchange rate of the country. The last data entry for the exchange rates show May 10.