Forex turnover dropped by 31.5%, as Nigeria’s exchange rate at the NAFEX window depreciated against the dollar to close at N386/$1 during intra-day trading on Monday, November 23.

Also, the naira appreciated marginally against the dollar, closing at N483/$1 at the parallel market on Monday, November 23, 2020, as ABCON warns forex speculators against forcefully pushing for the devaluation of the naira to aid their illegal activities.

This is also as demand pressure increases as importers stock up goods ahead of Christmas sales.

The CBN, a few days ago relaxed its earlier policy on banning third parties from having access to foreign exchange routed through Form M.

Parallel market: According to information from Abokifx – a prominent FX tracking website, at the black market where forex is traded unofficially, the Naira appreciated against the dollar to close at N483/$1 on Monday.

This represents an N1 gain when compared to the N484/$1 that it exchanged for on Friday, November 20.

• The local currency had strengthened by about 7.8% within one week in September at the black market, as the CBN introduced some measures targeted at exporters and importers.

• This is to boost the supply of dollars in the foreign exchange market and reduce the high demand for forex by traders.
• The CBN has sold about $1 billion to BDCs since they resumed forex sales on Monday, September 7, 2020.
• This was expected to inject more liquidity into the retail end of the foreign exchange market and discourage hoarding and speculation.
• However, the exchange rate against the dollar has remained volatile after the initial gains made, following the CBN’s resumption of sales of dollars to the BDCs.
• The President of the Association of Bureau De Change Operators, Aminu Gwadebe, said he expects the impact of the extra liquidity in the market to be gradual.
• Despite the drop in speculative buying of foreign exchange, the huge demand backlog by manufacturers and foreign investors still puts pressure and creates a volatile situation in the foreign exchange market.

NAFEX: The Naira depreciated against the dollar at the Investors and Exporters (I&E) window on Monday, closing at N386/$1.

• This represents a 17 kobo drop when compared to the N385.83/$1 that it exchanged for on Friday, November 20.
• The opening indicative rate was N386.05 to a dollar on Monday. This represents an 18 kobo gain when compared to the N386.23 that was recorded on Friday.
• The N394.83 to a dollar was the highest rate during intra-day trading before it still closed at N386 to a dollar. It also sold for as low as N383/$1 during intra-day trading.
• Forex turnover: Forex turnover at the Investor and Exporters (I&E) window declined by 31.5% on Thursday, November 19, 2020.
• According to the data tracked by Nairametrics from FMDQ, forex turnover dropped from $66.89 million on Friday, November 20, 2020, to $45.84 million on Monday, November 23, 2020.
• The CBN is still struggling to clear the backlog of foreign exchange demand, especially by foreign investors wishing to repatriate their funds.
• The drop in dollar supply after some trading days of improvement reinforces the volatility of the foreign exchange market. The supply of dollars has been on a decline for months due to low oil prices and the absence of foreign capital inflow into the country.
• 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.
• Total forex trading at the NAFEX window in the month of September was about $1.98 billion, compared to $843.97 million in August.
• 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.
• A financial expert and Managing Director of Financial Derivatives had stated that he expects the exchange rate at the parallel market to likely depreciate to N470-N475/$1 in November and December due to low oil prices that will further limit foreign exchange supply.
• Some members of MPC of the CBN have expressed serious concerns over the increasing demand pressure in the country’s foreign exchange market. This is an obligation of manufacturers to their foreign suppliers that continues to increase in the face of dollar shortages.

As stakeholders, players, and crypto wannabes ponder if increasing their stakes on the world’s most popular crypto seems ideal now, despite the fact that it’s trading near a record high, Nairametrics decided to weigh in on some key fundamentals showing Bitcoin looks like a bargain.

With prices exceeding $18,000 for the first time since 2017, BTC looks poised to break its previous all-time high. More investors are holding bitcoin for wealth preservation.

A recent report from Glassnode, revealed plummeting Bitcoin exchange balances support the narrative that investors intend to hold their flagship crypto more than ever before, taking into consideration that with the prevailing demand in play, and limited supply of Bitcoin, the price would most definitely go north.

With prices exceeding $18,000 for the first time since 2017, $BTC looks poised to break its previous all-time high.

Meanwhile, plummeting #Bitcoin exchange balances support the narrative that investors intend to hodl.

Read more in The Week On-Chain 👇https://t.co/fRTVsO1tqM pic.twitter.com/3VQWgsvmGO

— glassnode (@glassnode) November 23, 2020

Bitcoin liquidity continues its downward trajectory, buttressing that the macro bitcoin is becoming scarce for open sale.

It is also important to note that Bitcoin has a circulating supply of 19 million coins and a max supply of 21 million coins, meaning there are about 2million left to be mined.

Taking into account that about 4 million Bitcoins have been lost forever as a result of BTCs owners dying, and their next of kin not having access to such cryptos, it is fair to say there are only about 15million BTC presently in circulation to cater for over 7 billion people fighting to have a stake in Bitcoins, meaning that as BTC becomes scarce and more popular, it becomes a matter of time that the crypto asset valuation will hit the roof.

Bottom line

It’s vital to consider the bias saying that as global financial regulators begin to implement their regulatory framework on cryptos, it could become a matter of months for global banks and multinationals to increase their buying pressures on Bitcoin. Thereby, pushing the price beyond the reach of an average investor.

PayPal CEO, Mr. Schulman, recently hinted that the company would allow the usage of crypto funding for the 28 million merchants on its payments platform.

In a report credited to CNBC, the CEO of the payment juggernaut company elaborated further by saying, “Early next year, we’re going to allow cryptocurrencies to be a Funding Source for any transaction happening on all 28 million of our merchants and that will significantly bolster the utility of cryptocurrencies.”

READ: Why PayPal dropped 6% after posting its strongest earnings growth

The Chief Executive also disclosed that it was just a matter of time for digital currency to replace the old traditional forms of fiat currencies (paper money).

He said:

“As paper money slowly dissipates and disappears from how people are using transactions; Central banks, especially on the retail side, will need to replace paper money with forms of digital fiat currency.”

READ: Ripple emerges as fourth biggest fintech company globally, worth $10 billion

"As paper money slowly dissipates and disappears from how people are using transactions, central banks especially on the retail side will need to replace paper money with forms of digital fiat currency," says @PayPal CEO Dan Schulman. pic.twitter.com/pLuvc2RxPY

— Squawk Box (@SquawkCNBC) November 23, 2020

READ: NIPC releases its Q3 2020 report on Pioneer Status Incentive (PSI) applications

What this means

About a month ago, Nairametrics reported on PayPal Holdings Inc’s announcement that it would provide its users the opportunity to buy, hold, and sell cryptos directly from their PayPal accounts by early 2021.

It also hinted at a strategy to significantly boost its crypto’s utility capability, by making it readily available as a funding source for purchases with its 28 million clients globally.

READ: Unknown identity moves $117 million worth of Ethereum

In a press statement seen by Nairametrics, Dan Schulman, President and CEO, PayPal, gave key insights on why the global payment company was going crypto:

“The shift to digital forms of currencies is inevitable, bringing with it clear advantages in terms of financial inclusion and access, efficiency, speed, resilience of the payment system, and the ability for governments to disburse funds to citizens quickly.”