The Sad Dollar Naira Relationship

The Dollar Naira Relationship

  • The Dollar Naira exchange rate relationship is  a tale of the Naira depreciating against, the United States dollar from 1986 with the adoption of the flexible exchange rate regime.

The Dollar Naira is a currency pair that has a very lopsided relationship. And Nigerians in general suffer from the unequal union between the both currencies.

Just recently i had to fund my Forex account and i bought 100 dollar for forty thousand Naira, which is not funny at all. it is as if the financial gurus in the banking sector are doing nothing to reverse the trend.

Exchange rate fluctuation is seen as a general phenomenon around the globe which might have adverse effect on trade.

Exchange rate uncertainty is said to probably have a negative effect on international trade as bilateral trades are threatened with the risks involved.

Exchange rate volatility is a risk associated with unexpected changes in exchange rate, this is caused by some economic factors such as inflation rate, interest rate and balance of payments.

A country’s actual exchange rate deviation from an observable equilibrium is referred to as an exchange rate misalignment, a situation in which, when an exchange rate depreciates more than the equilibrium it is referred to as undervalued, and an appreciation of an exchange rate more than its equilibrium is referred to as overvalued.

The beginning of the generalized floating system in 1973 led to a high proportion of volatility and uncertainty of movements in exchange rate.

And both real and nominal exchange rates have fluctuated widely since the breakdown of the Bretton Woods system of fixed exchange rates.

The role of exchange rate in any economy is very significant as it directly and indirectly affects domestic price level, profitability of traded goods and services, allocation of resources and investment decisions.

Exchange rate movement and exchange rate uncertainty is an important factor which investors take into consideration in their decision to invest abroad.

The persistent depreciation in Naira exchange rate has led to a shortage of foreign exchange for the importation of the essential inputs for the industrial sector which has led to high costs of production in the country.

In less than 20 years Nigeria has had over ten exchange rate policies, some are reintroduced after being abolished, for instance the prevailing Dutch Auction System in the Nigerian foreign exchange rate market was first introduced in 1988 after the deregulation of the economy, abolished in the 1990s and reintroduced in 2007.

1. Relationship between oil trade and exchange rate

When it comes to countries like Nigeria with oil revenue as the center of the their economy, several studies have proven that there is strong correlation between changes in oil prices and exchange rate.

Nigeria benefits when there is an increase in the price of oil but also experiences a decline in the value of her currency against the US dollar due to the fact that the country is spending huge sum of money to import refined petroleum and other oil related products which are basically traded in US dollars. A fact that negatively affects the Dollar Naira relationship.

The Naira exchange rate has witnessed some period of relative calm since the Implementation of the structural adjustment programme (SAP) in July.

The naira which traded at N0.935 = 1.00USD in 1985 depreciated to N2.413 = 1.00USD and further to N7.901 against the US dollar in 1990. And currentlyfluctuates between 386 to 420 for a dollar in the first half of 2020.

For oil exporting countries all things being equal, an increase in the prices of oil should be considered positive while for oil importing countries should be considered as negative and vice versa if there is an abate in the prices of oil.

Nigeria relies heavily on the revenue from oil exports, but, at the same time extensively imports refined petroleum and other related products.

Nigeria relies heavily on the importation of required petroleum and its products for its oil consumption, the country’s domestic needs of oil are sourced from oil import which amounts for over 80%.

The drop in oil prices is currently mounting pressure on Nigeria to devalue the naira as decreasing export revenue depletes foreign-exchange reserves, limitimg the central bank’s ability to support the Nigerian currency.

According to Paris-based strategists at Societe Generale SA, Jason Daw and Phoenix Kalen, the central bank’s reserves has decreased by 20% in the past two years to the lowest since November 2017, and may soon reach the $30 billion threshold set by Governor Godwin Emefiele for the country to consider a devaluation.

According to SocGen strategists.  “The combination of a current-account deficit — previously due to strong imports but now being compounded by weak exports — portfolio outflows and lower oil prices will continue to deplete FX reserves and pressure the naira.”

The International Monetary Fund has already slashed the Nigeria’s economic growth projection to 2% from 2.5% because of a decline in oil prices.

Dollar Naira

2. THE DEPRECIATION OF THE NAIRA

To properly understand the Dollar Naira relationship and how it got to this stage. One must have to look back to how it all started, as a whole or in part.

It is important to note that the full strength of the Naira is tied to the foreign exchange earnings from crude oil exports. A reminder, in case that fact somehow eluded you while going through the above paragraphs. 

Crude oil dealings make up 95% percent of our country’s foreign exchange purse. 

While other sources of foreign exchange such as diaspora remittances and earnings from petroleum gases, agricultural exports, constitute less than 5% of the entire foreign currency reserve.

A number of factors have contributed to the dwindling fortunes of the naira in all the foreign exchange markets. Some of them are fundamental while others are secondary. The fundamental factors emanate from structural imbalances relating to:

Weak production base and undiversified nature of the economy Import-dependent production structure.

 Fragile export base and weak non-oil export earnings. Fiscal imbalances and accommodating monetary policy or expansionary fiscal and monetary policies.


The other factors include: Sluggish foreign capital inflow. Phenomenon of excess demand for foreign exchange in relation to supply.

Instability of earnings from crude oil, upon which the economy
depends very heavily.

Unguided trade liberalization policy, speculative activities and
sharp practices of authorized foreign exchange dealers, for example, round tripping in the foreign exchange market.


(BOP) position. The capital account of the BOP has in the past
experienced significant pressures with deficits rising from 8.6 per cent of GDP in 2000 to 11.6 per cent in 2002. The overall balance declined from a positive balance of 6.9 per cent of GDP to a negative balance of 10.5 per cent in the same period.


Huge BOP deficits engender pressures on the Naira exchange
rate and Capital flight. This not only engenders a loss of productive
resources to the country, but also has destabilizing effects on
domestic macro economic variables including the exchange rate.

Specifically, the huge depreciation in most of the years of the first half of the 2000s were attributed to additional factors such as:

  • Excess liquidity in the system induced by the transfer of
    government accounts from the Central Bank of Nigeria to
    commercial banks and the huge extra budgetary spending of 1999 on unproductive activities; excess liquidity in the  economy has also not been helped by the need for the CBN to accommodate the fiscal operations of the government.
  • The release in the first quarter of year 2001 of N198 billion excess crude oil revenue to various tiers of government, besides their various huge development budgets and
  • Speculative demand for foreign exchange stemming from uncertainties created by social and political unrest, expectations of future depreciation of the naira as the currency weakens, as well as the deterioration of the external
    sector position.

The exchange rate of the naira depreciated against the major intervention currency, the United States dollar from 1986 with the
adoption of the flexible exchange rate regime.

It further depreciated to N17.30 and N22.05 = US$1.00 in 1992 and 1993, respectively. In 1994 the exchange rate of the naira was fixed at N21.8861 = US$1.00.

But the fixed rate could not stand and so depreciated from the fixed rate of N21.8861 per dollar in 1994 to a high of N82.33 = US$1.00 in 1995, depreciated further to N84.38 = US$1.00 and N92.65 = US$1.00 in 1998 and 1999, respectively.

The average exchange rate at N111.90 = US$1.00 for 2001 depreciated to N128.75 during the period 2002-2005. 

3. Dollar Naira Exchange Rates 2020

Friday 10 July 2020 1 USD = 387.49 NGN  
Thursday 9 July 2020 1 USD = 387.27 NGN  
Wednesday 8 July 2020 1 USD = 387.66 NGN  
Tuesday 7 July 2020 1 USD = 387.67 NGN  
Monday 6 July 2020 1 USD = 386.91 NGN  
Sunday 5 July 2020 1 USD = 388.04 NGN  
Saturday 4 July 2020 1 USD = 388.00 NGN  
Friday 3 July 2020 1 USD = 388.00 NGN  
Thursday 2 July 2020 1 USD = 387.76 NGN  
Wednesday 1 July 2020 1 USD = 387.88 NGN  
Tuesday 30 June 2020 1 USD = 387.21 NGN  
Monday 29 June 2020 1 USD = 387.50 NGN  
Sunday 28 June 2020 1 USD = 387.36 NGN  
Saturday 27 June 2020 1 USD = 387.48 NGN  
Friday 26 June 2020 1 USD = 387.48 NGN  
Thursday 25 June 2020 1 USD = 387.44 NGN  
Wednesday 24 June 2020 1 USD = 388.13 NGN  
Tuesday 23 June 2020 1 USD = 387.36 NGN  
Monday 22 June 2020 1 USD = 386.04 NGN  
Sunday 21 June 2020 1 USD = 386.71 NGN  
Saturday 20 June 2020 1 USD = 387.50 NGN  
Friday 19 June 2020 1 USD = 387.50 NGN  
Thursday 18 June 2020 1 USD = 387.44 NGN  
Wednesday 17 June 2020 1 USD = 386.98 NGN  
Tuesday 16 June 2020 1 USD = 386.72 NGN  
Monday 15 June 2020 1 USD = 387.41 NGN  
Sunday 14 June 2020 1 USD = 387.51 NGN  
Saturday 13 June 2020 1 USD = 387.48 NGN  
Friday 12 June 2020 1 USD = 387.48 NGN  
Thursday 11 June 2020 1 USD = 388.05 NGN  
Wednesday 10 June 2020 1 USD = 387.48 NGN  
Tuesday 9 June 2020 1 USD = 387.11 NGN  
Monday 8 June 2020 1 USD = 387.36 NGN  
Sunday 7 June 2020 1 USD = 387.90 NGN  
Saturday 6 June 2020 1 USD = 387.48 NGN  
Friday 5 June 2020 1 USD = 387.48 NGN  
Thursday 4 June 2020 1 USD = 387.51 NGN  
Wednesday 3 June 2020 1 USD = 387.79 NGN  
Tuesday 2 June 2020 1 USD = 387.21 NGN  
Monday 1 June 2020 1 USD = 387.10 NGN  
Sunday 31 May 2020 1 USD = 387.04 NGN  
Saturday 30 May 2020 1 USD = 387.52 NGN  
Friday 29 May 2020 1 USD = 387.52 NGN  
Thursday 28 May 2020 1 USD = 387.56 NGN  
Wednesday 27 May 2020 1 USD = 390.41 NGN  
Tuesday 26 May 2020 1 USD = 390.46 NGN  
Monday 25 May 2020 1 USD = 390.57 NGN  
Sunday 24 May 2020 1 USD = 389.39 NGN  
Saturday 23 May 2020 1 USD = 390.50 NGN  
Friday 22 May 2020 1 USD = 390.51 NGN  
Thursday 21 May 2020 1 USD = 390.09 NGN  
Wednesday 20 May 2020 1 USD = 388.50 NGN  
Tuesday 19 May 2020 1 USD = 389.99 NGN  
Monday 18 May 2020 1 USD = 386.37 NGN  
Sunday 17 May 2020 1 USD = 386.93 NGN  
Saturday 16 May 2020 1 USD = 387.00 NGN  
Friday 15 May 2020 1 USD = 387.00 NGN  
Thursday 14 May 2020 1 USD = 390.08 NGN  
Wednesday 13 May 2020 1 USD = 389.92 NGN  
Tuesday 12 May 2020 1 USD = 388.55 NGN  
Monday 11 May 2020 1 USD = 389.48 NGN  
Sunday 10 May 2020 1 USD = 389.77 NGN  
Saturday 9 May 2020 1 USD = 390.00 NGN  
Friday 8 May 2020 1 USD = 390.00 NGN  
Thursday 7 May 2020 1 USD = 389.56 NGN  
Wednesday 6 May 2020 1 USD = 390.23 NGN  
Tuesday 5 May 2020 1 USD = 389.91 NGN  
Monday 4 May 2020 1 USD = 389.89 NGN  
Sunday 3 May 2020 1 USD = 388.61 NGN  
Saturday 2 May 2020 1 USD = 389.51 NGN  
Friday 1 May 2020 1 USD = 389.51 NGN  
Thursday 30 April 2020 1 USD = 390.03 NGN  
Wednesday 29 April 2020 1 USD = 389.78 NGN  
Tuesday 28 April 2020 1 USD = 389.80 NGN  
Monday 27 April 2020 1 USD = 390.05 NGN  
Sunday 26 April 2020 1 USD = 388.05 NGN  
Saturday 25 April 2020 1 USD = 390.00 NGN  
Friday 24 April 2020 1 USD = 390.00 NGN  
Thursday 23 April 2020 1 USD = 389.96 NGN  
Wednesday 22 April 2020 1 USD = 390.02 NGN  
Tuesday 21 April 2020 1 USD = 386.35 NGN  
Monday 20 April 2020 1 USD = 385.22 NGN  
Sunday 19 April 2020 1 USD = 385.51 NGN  
Saturday 18 April 2020 1 USD = 385.10 NGN  
Friday 17 April 2020 1 USD = 386.48 NGN  
Thursday 16 April 2020 1 USD = 386.41 NGN  
Wednesday 15 April 2020 1 USD = 386.01 NGN  
Tuesday 14 April 2020 1 USD = 385.47 NGN  
Monday 13 April 2020 1 USD = 384.34 NGN  
Sunday 12 April 2020 1 USD = 374.81 NGN  
Saturday 11 April 2020 1 USD = 382.75 NGN  
Friday 10 April 2020 1 USD = 367.00 NGN  
Thursday 9 April 2020 1 USD = 378.95 NGN  
Wednesday 8 April 2020 1 USD = 380.93 NGN  
Tuesday 7 April 2020 1 USD = 379.76 NGN  
Monday 6 April 2020 1 USD = 378.86 NGN  
Sunday 5 April 2020 1 USD = 383.95 NGN  
Saturday 4 April 2020 1 USD = 389.29 NGN  
Friday 3 April 2020 1 USD = 389.29 NGN  
Thursday 2 April 2020 1 USD = 383.24 NGN  
Wednesday 1 April 2020 1 USD = 388.88 NGN  
Tuesday 31 March 2020 1 USD = 391.64 NGN  
Monday 30 March 2020 1 USD = 389.02 NGN  
Sunday 29 March 2020 1 USD = 381.43 NGN  
Saturday 28 March 2020 1 USD = 386.81 NGN  
Friday 27 March 2020 1 USD = 386.81 NGN  
Thursday 26 March 2020 1 USD = 371.63 NGN  
Wednesday 25 March 2020 1 USD = 363.47 NGN  
Tuesday 24 March 2020 1 USD = 380.74 NGN  
Monday 23 March 2020 1 USD = 377.91 NGN  
Sunday 22 March 2020 1 USD = 370.22 NGN  
Saturday 21 March 2020 1 USD = 369.53 NGN  
Friday 20 March 2020 1 USD = 370.01 NGN  
Thursday 19 March 2020 1 USD = 366.73 NGN  
Wednesday 18 March 2020 1 USD = 367.72 NGN  
Tuesday 17 March 2020 1 USD = 368.37 NGN  
Monday 16 March 2020 1 USD = 367.05 NGN  
Sunday 15 March 2020 1 USD = 367.22 NGN  
Saturday 14 March 2020 1 USD = 365.14 NGN  
Friday 13 March 2020 1 USD = 365.14 NGN  
Thursday 12 March 2020 1 USD = 365.01 NGN  
Wednesday 11 March 2020 1 USD = 366.38 NGN  
Tuesday 10 March 2020 1 USD = 366.56 NGN  
Monday 9 March 2020 1 USD = 366.70 NGN  
Sunday 8 March 2020 1 USD = 366.18 NGN  
Saturday 7 March 2020 1 USD = 365.47 NGN  
Friday 6 March 2020 1 USD = 364.99 NGN  
Thursday 5 March 2020 1 USD = 365.97 NGN  
Wednesday 4 March 2020 1 USD = 364.96 NGN  
Tuesday 3 March 2020 1 USD = 365.76 NGN  
Monday 2 March 2020 1 USD = 364.55 NGN  
Sunday 1 March 2020 1 USD = 365.49 NGN  
Saturday 29 February 2020 1 USD = 365.49 NGN  
Friday 28 February 2020 1 USD = 365.48 NGN  
Thursday 27 February 2020 1 USD = 365.88 NGN  
Wednesday 26 February 2020 1 USD = 364.08 NGN  
Tuesday 25 February 2020 1 USD = 365.00 NGN  
Monday 24 February 2020 1 USD = 363.50 NGN  
Sunday 23 February 2020 1 USD = 363.30 NGN  
Saturday 22 February 2020 1 USD = 363.50 NGN  
Friday 21 February 2020 1 USD = 363.50 NGN  
Thursday 20 February 2020 1 USD = 364.43 NGN  
Wednesday 19 February 2020 1 USD = 364.47 NGN  
Tuesday 18 February 2020 1 USD = 364.51 NGN  
Monday 17 February 2020 1 USD = 364.09 NGN  
Sunday 16 February 2020 1 USD = 364.29 NGN  
Saturday 15 February 2020 1 USD = 363.50 NGN  
Friday 14 February 2020 1 USD = 363.50 NGN  
Thursday 13 February 2020 1 USD = 364.21 NGN  
Wednesday 12 February 2020 1 USD = 364.25 NGN  
Tuesday 11 February 2020 1 USD = 364.35 NGN  
Monday 10 February 2020 1 USD = 364.25 NGN  
Sunday 9 February 2020 1 USD = 364.36 NGN  
Saturday 8 February 2020 1 USD = 363.50 NGN  
Friday 7 February 2020 1 USD = 363.50 NGN  
Thursday 6 February 2020 1 USD = 363.89 NGN  
Wednesday 5 February 2020 1 USD = 363.97 NGN  
Tuesday 4 February 2020 1 USD = 364.07 NGN  
Monday 3 February 2020 1 USD = 363.69 NGN  
Sunday 2 February 2020 1 USD = 362.23 NGN  
Saturday 1 February 2020 1 USD = 361.99 NGN  
Friday 31 January 2020 1 USD = 361.99 NGN  
Thursday 30 January 2020 1 USD = 362.12 NGN  
Wednesday 29 January 2020 1 USD = 362.97 NGN  
Tuesday 28 January 2020 1 USD = 362.50 NGN  
Monday 27 January 2020 1 USD = 362.66 NGN  
Sunday 26 January 2020 1 USD = 362.40 NGN  
Saturday 25 January 2020 1 USD = 362.50 NGN  
Friday 24 January 2020 1 USD = 362.50 NGN  
Thursday 23 January 2020 1 USD = 361.61 NGN  
Wednesday 22 January 2020 1 USD = 361.86 NGN  
Tuesday 21 January 2020 1 USD = 361.96 NGN  
Monday 20 January 2020 1 USD = 362.72 NGN  
Sunday 19 January 2020 1 USD = 361.75 NGN  
Saturday 18 January 2020 1 USD = 361.73 NGN  
Friday 17 January 2020 1 USD = 361.73 NGN  
Thursday 16 January 2020 1 USD = 361.29 NGN  
Wednesday 15 January 2020 1 USD = 362.08 NGN  
Tuesday 14 January 2020 1 USD = 362.50 NGN  
Monday 13 January 2020 1 USD = 362.70 NGN

The Dollar Naira  exchange rate is thus:

Minimum: 361.29 NGN

Maximum: 391.64 NGN

Average: 378.05 NGN

 

Sources: 1, 2, 3, 4, 5, 

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