After much speculation and possible devaluation of the Naira by the CBN recently, the oil-backed currency crashed to 400 Naira to the dollar at the close of business on Friday at the Forward Market. By this morning, the exchange rate between the dollar to the Naira is 413/$.
According to Investopeadia ” A forward market is an over-the-counter marketplace that sets the price of a financial instrument or asset for future delivery. Forward markets are used for trading a range of instruments, but the term is primarily used with reference to the foreign exchange market.”
Analysts believe that the Naira would depreciate further to around 10 to 20% by 2021 following the decrease in the price of oil. The oil commodity backed currency follows the trend of oil prices in the international market.
The foreign reserve of the country is also decreasing. As a result, the CBN instituted several policies to defend the Naira against the dollar. This involves backing the Government closure of land border in the country and banning several commodities from accessing foreign currency in the official markets.
Several respondents were surveyed by Bloomberg to determine the sustainability of defending the Naira in the current official rate. Majority of respondents believe that the current rate of the Naira to dollar is not sustainable following market realities.