Naira loses a third in value in 2016

Stocks down 6%

Naira, Nigeria currency lost around a third of its official value against the dollar in 2016 while the stock market declined 6.17 percent over the same period, reflecting the economic crisis in Africa’s biggest economy.

According to Reuters report, the currency closed at 305 to the dollar on the official interbank market on Friday – the last day of trading in 2016 – compared with 199.50 a dollar a year ago, a 34.6 percent depreciation.

It fell to a low of 490 a dollar on the black market against 266 to the greenback last year.

The stock market index closed at 26,874 points on Friday against 28,642 points at the end of last year. However, it closed up 0.34 percent on Friday compared with the previous day.

Africa’s biggest economy fell into its first recession in 25 years in the second quarter of the year due to low global oil prices. Crude oil sales make up about 70 percent of government revenue and 90 percent of the OPEC member’s foreign exchange.

Nigeria’s foreign exchange reserves fell 11.7 percent to $25.72 billion by Dec. 28, from $29.13 billion a year earlier, central bank data showed on Friday, reflecting the impact of low oil prices and efforts to support the ailing local currency.

The central bank removed its currency peg in June, after 16 months, in a bid to alleviate the foreign currency shortages that pushed down the naira’s value and pushed more transactions to the parallel market.

“The parallel market was more liquid in the course of the year and as a result many investors benchmark their transactions on the exchange rate at the market,” another currency dealer said.

A senior treasurer in a leading commercial lender said the official forex market was more volatile in the year because trading by the central bank controlled the currency rate despite its introduction of a “flexible currency” exchange.

The cost of borrowing among banks also went up 10 percent at the close of market on Friday compared with 1 percent on the last business day in December last year.

“We expect the naira to decline further to around 400/$ next year as the central bank gradually reduces its grip on the forex market early next year,” said a senior banker who did not want to be named.

“It should recover a little thereafter as foreign investors confidence returns to the market,” he added.